Thanks for the quick reply deadravel
does the number of units we hold increase or just the total value of the fund?
i have the impression that we're still highly dependent on the market price of the ETF, so it's more like value investing that we foresee growth of this fund due to yearly yields.
i'm kinda confused here, appreciate if you could help me see the compounding effect.
In addition to maeda-san's reply earlier, I can provide a numerical example.
Let's say ETF A is a Distributing fund, while ETF B is an Accumulating fund (all dividends reinvested).
Beginning of year:
ETF A: $1.80 per share
ETF B: $1.80 per share.
You buy four shares each of A and B, and you pay $7.20 for each.
End of year:
ETF A: $2.00
ETF B: $2.00
Both funds end up trading at the same price. In addition, both declare dividends of $0.50 per share. As you have bought four shares each of A and B, your situation is as below:
ETF A: Trades at $2.00 per share, and you get $2.00 in dividends ($0.50 multiply by four shares. This lets you buy another share of ETF A, so you end up with 5 shares of ETF A. Of course, this is not accurate as you have to pay brokerage to get that extra share. But theoretically, you have $10 worth of ETF A shares now.
ETF B: Will trade at $2.50 per share as the dividend is reinvested by accumulating all the extra dividends and buying into more shares of the underlying index components in proportion. You will still only have four shares. However, they are also worth a total of $10.
In both cases, you end up with the same value of shares, just in different forms.
Thus, the advantages of holding Accumulating fund is that you don't have to worry about reinvesting your dividends and you will incur less brokerage. In this context, and for the world ETF, ST recommends the IWDA listed on LSE.
But personally, I feel it's more shiok to get dividends, that's why I went with VWRD which is also listed on LSE.
Hope this helps!