2Yr·

I've had an understanding question regarding accumulating and distributing ETFs for a while.

How exactly does reinvestment work?

With the distributing ETFs, I can buy more shares through the dividends, whereby after a certain time the compound interest increases the possible share purchase exponentially.

With reinvestment ETFs, the dividends paid out by the companies are reinvested in the ETF.

Does the fund volume increase?

But my shares do not become more, as if I can buy new ones with the distributing ETF.

And how the dividends are reinvested in the reinvesting ETF is also not clear to me.

Are only the same companies that also distribute dividends bought again with the dividends?

Are new shares bought from all companies in the ETF?

How does this offer me as an investor an advantage, if only the fund volume and invested sum in the ETF contained companies increases, except possibly that one does not have to pay capital gains tax on the dividend.

Maybe I'm lost and someone can explain to me how I can also profit from the interest rate in the case of accumulation funds.

#etfs
#ausschütter
#thesaurierer

14 Comments

Gottegris@Gottegris

2Yr

@ChrisBizz @randomdude Then you can just buy a high volume ETF from the beginning and not have to buy an ETF and wait until the reinvestment grows the individual positions of the companies in the ETF. Or am I missing something?

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Golden Boy@randomdude

2Yr

@Gottegris The starting price of an ETF is set arbitrarily when it comes onto the market. Something easily tradable, e.g. 5 or 10 euros. The value or price development is then determined by the NAV and, to a certain extent, also on the stock exchange.

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Golden Boy@randomdude

2Yr

@randomdude Whether you have 100 shares in an MSCI World ETF that cost 10 euros or 10 that cost 100 euros, it doesn't matter. Both will rise or fall in value in the same way.

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Christoph@ChrisBizz

2Yr

@Gottegris I don't quite understand your question. The volume of the ETF means the amount of money under management. In general, this should not be too low because otherwise there might be a higher risk that the ETF will be closed, but this has nothing to do with the increase in value of an ETF share due to the accumulation.

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TimLie@TimLie

2Yr

@Gottegris At the end of the day, you want YOUR assets invested in the fund to increase. A long-dated ETF with high fund assets is a good indicator that the fund is running. I don't agree with the idea that a high fund volume has an impact on the return. As I said at the beginning, it depends on the return of your invested capital. If you would enter now at 80€ per share instead of 70€, because you want to wait until the fund has a large volume, you would have missed 10€ return per share. You also have to look at the total number of shares. Just because one fund is larger than the other does not mean that the share price is automatically higher. Maybe issuer 2 has issued twice as many shares and the price per share is even lower than issuer 1. Also, like normal securities, the price of an ETF is determined by demand and not just by the value of the securities it contains. In summary, you need to know how much money you can/want to put into an ETF. Depending on which ETF you put it into, you buy shares of a fund with it. What percentage they represent of the total fund depends on the fund's assets. How much percentage you make with your shares depends on how well the ETF performs.

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Gottegris@Gottegris

2Yr

@TimLie thanks I had nen thinking error all the time :D

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Deleted User

2Yr

Comment was deleted

Gottegris@Gottegris

2Yr

@BearStearnsCFO How can that be? The value depends on how the companies in the ETF perform.

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Christoph@ChrisBizz

2Yr

@BearStearnsCFO I don't think that the distribution will increase the value of the ETF shares, because the share price of the distributing company will decrease according to the distributed dividend. As with the investor who holds individual shares, this should also apply if an ETF holds the share? I think that initially only the cash position within the ETF increases. Only when this cash is invested in further shares and their price subsequently increases can the compound interest effect arise and the value of the ETF shares increase accordingly.

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Golden Boy@randomdude

2Yr

@ChrisBizz Exactly, and reinvesting the distribution is called reinvesting. distributing funds, on the other hand, become worth less and less because the net asset value (NAV) decreases.

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Golden Boy@randomdude

2Yr

@randomdude And a kind of compound interest effect is created because the distributions are used to buy new shares, which increase in value.

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Christoph@ChrisBizz

2Yr

@randomdude I agree (and just added the same thought when you posted). Per ETF share, you then have more shares of the companies included than before. What I was not aware of (see the video from @California_Dreamin): It may well be that not only shares of the distributing company are bought, but that shares of all companies included in the ETF are bought. I'm still not clear whether this is good or bad. After all, the carrots in the index would then also be bought from the nice dividends...

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Golden Boy@randomdude

2Yr

@ChrisBizz 1. of course, carrots also (and especially?) distribute 😜 2. the distributions are used for rebalancing, because such a fund management always wants to track the index as closely as possible.

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Christoph@ChrisBizz

2Yr

@randomdude Yes, that's a good point about rebalancing 👍

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