This means that you receive cash flow and can use the money received however you choose. In contrast to accumulating ETFs, distributing ETFs pay out dividends to investors. When another round of dividends is issued, this will bring the NV, NAV and your portfolio value up even further, without you having to do anything. The compounding effect comes into play when the fund manager uses the €1,200 in cash to purchase new shares. The value of your portfolio is now €5,012 (€25.06*200 shares). Since the ETF has 600 shares of Company A, it now has €1,200 in cash thanks to the dividend, bringing the NV to €501,200 and the NAV to €25.06. Say Company A issues a dividend of €2 per share. You bought €5,000 worth of ETF shares, which is 200 shares.2,000 shares of Company B worth €100 per share.600 shares of Company A worth €500 per share.There are 20,000 shares outstanding, making the NAV €25.NV is the total value, and NAV is the NV divided by the number of shares issued. But first, it is important to understand Net Value (NV) and Net Asset Value (NAV). To better understand exactly how an accumulating ETF works, we work through an example. As a result, the value of the ETF increases. What is an accumulating ETF?Īn accumulating ETF is a type of ETF in which any dividends that are paid out by its underlying holdings within the ETF are reinvested into the fund by the fund manager at no extra expense. Since there are many underlying assets within one single product, ETFs enable you to easily diversify your portfolio at an affordable price.Īre you new to investing or want to learn more? Then, read this article about investing in ETFs. For example, an ETF that tracks the S&P 500 will be composed of fractions of shares of companies within this index. The performance of an ETF follows the price movements of the underlying products in the fund. Unlike some other funds, ETFs are bought and sold on a stock exchange. You can think of it as a basket of securities. An ETF is a product that follows an index, commodity, bond or composition of products. What is an ETF?īefore going more in-depth about the difference between these two ETFs, it is important to understand what an ETF is.
But what exactly are accumulating ETFs and distributing ETFs? Keep reading to learn more about these types of financial products. Have you ever seen an exchange-traded fund (ETF) with ‘ACC’ or ‘DIST’ at the end of its name? If it says ‘ACC’, it means that it is an accumulating ETF, and if it says ‘DIST’, it means that it is a distributing ETF.
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