When buying a fund, an investor may be presented with the option to purchase accumulation units or income units. Accumulation refer to the net income from the fund being reinvested back into the fund (with no charge to reinvest), this is different to income units whereby the net income from the fund goes directly to the investor in the form of cash.
So an investor may be asking themselves which one is best to select? The answer is that an investor may find either option more appealing depending on their circumstances. Generally, investment professionals view accumulation units as the better option because the the reinvestment of dividends can have a snow-ball effect on future returns from the fund.
However, an investor may prefer income units if they are going to rely on income from the fund to pay for living expenses.
Some believe that accumulation units are the perfect option for those investors who at the pre-retirement stage (in work) whereas income units are more suited for those in retirement and could do with the income directly to fund their respective lifestyle and living expenses.