Understanding the difference between accumulation and in income units when buying a fund are important. You will normally be presented with the option to buy either an accumulation or income version of the fund.
There is no difference to the fund itself, but there is a difference in how the dividends (or interest) is distributed back to you from the fund’s performance.
Income units if you want to take the income, accumulation to reinvest for growth
If you opt for income units you are asking for the dividends or interest from your fund to be paid back to you as cash.
If you opt for accumulation units, you are asking for the dividends or interest from your investment to be distributed back into the fund increase your holding.
Should you be on the hunt for capital growth then accumulation units are usually the preferred choice. Because if the fund performs well, you will see compounded growth – i.e. your greater stake means you will have greater reward.
Although, if you are looking for a form of income too from your investment, then income units will be the way to go – although you may miss out on some capital growth.