What is The Difference Between Acc and Inc Funds?

He’s
called
Henry
Whittaker
and
he
manages
a
very
popular
fund
for
St
Paul’s
Asset
Management
(SPAM)
in
London.
Since
its
inception
in
2012,
Whittaker’s
Robotics
and
Intelligence
Equity
fund
(RIEF)
has
attracted
nearly
a
billion
quid
in
assets.

Despite
a
rough
time
last
year
and
some
noticeable
outflows,
performance
is
now
sufficiently
attractive
that
it
could
be
worth
jumping
on
the
bandwagon
before
it’s
too
late.

Off
you
go
to
your
fund
supermarket
online
(otherwise
known
as
a
retail
investing
platform),
where
you
double-check
your
budget
and
get
ready
to
buy.
But
suddenly
you
face
a
choice:
do
you
buy
the
“acc”
share
class,
or
the
“inc”
share
class?

Gulping,
you
sip
your
tea
and
open
a
Google
tab.

Acc
and
Inc:
The
Key
Difference

Stop.
You
may
need
that
tea,
but
you
don’t
need
Google,
because
we’re
here
to
spare
your
blushes.
So
just
what
is
“inc”
and
how
does
it
differ
to
“acc”?

Before
we
began,
let’s
just
note
one
thing.
SPAM
and
RIEF
are
entirely
fictional
examples,
and
poor
Henry
is
just
a
figment
of
my
imagination.
But
they’re
helpful
examples
that
might
help
all
this
feel
real
without
making
it
intimidating. 

Put
simply,
“inc”
and
“acc”
mean
“income”
and
“accumulation”,
respectively.
Usually,
these
are
the
two
different
unit
options
on
offer
to
investors.
Choosing
one
will
affect
how
dividends
are
paid
to
you.

“Acc”
units
reinvest
the
dividends
the
fund
receives
on
your
behalf.
That
means
that,
when
you
buy
RIEF
from
SPAM
on
your
platform,
the
net
income
from
the
fund
will
be
reinvested
back
into
the
fund
at
no
charge
to
you.

Income
units
are
different.
Rather
than
reinvesting
any
dividends,
income
units
pay
them
out
into
your
platform’s
cash
or
ISA
account,
or
just
directly
into
your
bank
account.

At
this
point,
it’s
worth
noting
many
income
funds
are
“acc”
units
designed
to
harness
the
power
of
compounding
growth.
By
reinvesting
dividends
immediately,
investors
get
all
the
benefits
of
the
gathering
momentum
a
fund
will
establish
its
investments
are
successful
(in
theory)

Note
too
that,
in
the
event
you
choose
an
“inc”
fund,
you
may
have
to
decide
when
you
get
your
money.
Some
funds
will
offer
monthly,
quarterly,
bi-annual,
and
annual
payout
options.

The
Balance
Between
Yield
and
Growth

First
on
your
mind
may
be
this:
am
I
still
an
“income”
investor
if
I’m
picking
the
“acc”
unit?

The
short
answer
is
“yes,
absolutely”,
it’s
just
that
the
income
you
sacrifice
in
the
short-term
comes
back
to
you
later
in
the
form
of
(hopefully)
higher
returns. 

But
it
all
depends
on
what
you
are
trying
to
achieve.
Morningstar
Investment
Management
(MIM)
senior
portfolio
manager
Mark
Preskett
has
previously
said
the
main
benefit
of
“acc”
units
is
the
large
portion
of
your
total
returns
they
provide.

However,
he
adds,
you
may
wish
to
consider
the
“inc”
unit
if
you
are
going
to
be
relying
on
your
fund’s
income
for
your
living
expenses.

If
you’re
putting
Whittaker’s
fund
in
your
“satellite”
portfolio
so
you
can
see
how
you
get
on
and
not
smart
too
much
if
it
fails,
then,
“acc”
may
be
a
good
option.
If
your
sanity
in
retirement
depends
somewhat
on
his
skill,
however,
“inc”
may
be
a
better
fit.

You
may
notice
the
elephant
in
the
room
here:
you
need
a
financial
plan. 

“We
think
income
share
classes
are
a
natural
way
to
build
income
portfolios
but
should
be
viewed
as
just
one
small
part
of
what
makes
an
income
strategy
successful,”
says
Morningstar
Wealth
chief
investment
officer
for
EMEA
Mike
Coop.

“Getting
the
right
balance
between
yield,
income
growth,
capital
growth,
and
risk,
is
critical
–
the
key
to
meeting
these
goals
is
to
have
broad
and
deep
capital
markets
research
as
well
as
manager
research
so
you
can
identify
and
measure
natural
sources
of
incomes
and
growth
in
a
cost-effective
and
risk-controlled
way.”

Put
simply,
don’t
dive
straight
in
if
you
don’t
already
have
some
semblance
of
what
you
want
as
your
broader
outcome.
That’s
particularly
the
case
given
the
fees
you
can
incur
if
you
change
your
mind
and
decide
to
revert
to
“inc”
from
“acc”
or
vice
versa.
Mistakes
are
costly.
As
ever,
people
with
particularly
complicated
finances –
or
those
who
just
want
to
outsource
the
decision –
should
seek
professional
advice
from
a
regulated
financial
adviser.

Funds –
What
Are
You
Paying
For?

And
speaking
of
fees,
make
sure
you
know
what
you’re
paying
for.
If
you
tend
to
suffer
from
tunnel
vision,
remember
there
are
always
other
options
available
to
you.

“The
basics
of
investing
still
apply,”
Coop
says. 

“Are
you
being
charged
a
higher
fee
for
the
‘inc’
or
‘acc’
share
class
and
is
that
worth
paying
for?
Are
you
aware
of
lower-cost
passive
income
strategies
that
offer
‘inc’
share
classes
rather
than
assuming
that
only
active
strategies
make
sense.
Is
the
manager
and
strategy
right
for
what
you
need?”

Overall,
just
remember
that
you
may
be
selling
yourself
short
by
not
seeing
the
bigger
picture. 

“The
two
deadly
sins
of
income
investing
are
turning
your
capital
into
income,
and
taking
excessive
and
often
unintentional
risk
to
generate
income
yield,”
Coop
says.

“Knowing
the
tradeoffs
you
are
making
between
income,
growth
and
risk
helps
with
setting
realistic
expectations
and
identifying
strategies
most
likely
to
achieve
them.”

Henry
Whittaker
and
SPAM
may
not
be
real,
then,
but
the
options
available
to
you
very
much
are.

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