Accumulating funds

Funds such as ETFs often come in two varieties: accumulating and distributing. This refers to the type of dividend and coupon distribution. With the accumulating variety, the distribution remains directly in the fund and is reinvested immediately. This results in less time delay and a stronger compound interest effect.

Whether an ETF is distributing or accumulating can be easily determined from the fact sheet. It can often also be identified directly from the suffixes «ACC» or «DIST» after the ETF name. ACC stands for accumulating and thus for reinvesting. DIST stands for distributing and thus for distributing.

A common misconception is the assumption that reinvesting funds are exempt from withholding and foreign withholding taxes. For Swiss investors, dividends and coupon payments normally constitute taxable income. It is irrelevant to the Swiss tax authorities whether the dividends are distributed to shareholders or reinvested directly in the fund. Nevertheless, the accumulating option has an efficiency advantage: there is a time lag between the tax deduction in the form of withholding and source tax and the refund by the tax administration. During this time, the money cannot be invested. In addition, stamp duties and additional currency conversions may apply when distributions are reinvested.

True Wealth CEO Felix Niederer discusses this topic in more detail in the following video podcast.

https://www.truewealth.ch/blog/distributing-or-accumulating-etf