Funds & wrappers
Distribution
Also called Income units or Accumulation units
Income a fund pays out to holders, as opposed to reinvesting it inside the fund.
How it works
Distributing units pay income to you as cash. Accumulating units reinvest it automatically, increasing the value of each unit instead.
Total return is the same before tax. The difference is whether you receive cash and whether you must act to reinvest it.
Where it misleads people
Accumulation units still generate taxable income in most jurisdictions, even though no cash arrives. The reinvested amount also increases your cost basis, and failing to track that means paying tax twice.
Related terms
- DividendA cash payment a company makes to its shareholders out of its profits.
- Total returnThe full return from an investment: price change plus every dividend or interest payment received.
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- Income tax on investmentsTax on dividends and interest, usually charged in the year received.
More in Funds & wrappers
All 25 Funds & wrappers terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.