This guide explains accumulating vs. distributing ETFs, compares their performance in various accounts, and shows how to maximize returns, including with carbon allowances from Homaio.
Two-thirds of ETFs (exchange-traded funds) are accumulating, compared to only one-third distributing ETFs (justETF). Why such a difference?
Accumulating and distributing ETFs allow you to invest in the stock market with low fees. In practice, when investing in an ETF, you can choose between two options (distribution policies defined by the management company):
You can invest in accumulating or distributing ETFs (the content) within tax-advantaged accounts (the containers) where taxation only occurs upon withdrawal.
The choice between a distributing or accumulating ETF is not crucial in tax-advantaged accounts (outside a standard brokerage account, CTO) such as life insurance, equity savings plans (PEA), or retirement savings plans (PER).
However, in a CTO (non-tax-advantaged account), it is beneficial to opt for accumulating ETFs to:
Here is a comparison table showing that, in a CTO, it is generally more advantageous to invest in accumulating ETFs than distributing ETFs.
FeatureAccumulating ETF in CTODistributing ETF in CTODeferred taxation✅ Yes (taxed only upon sale)❌ No (taxed as dividends are received)No annual tax reporting✅ Yes❌ NoDividend frequencyNo dividends (automatically reinvested in the ETF)Regular (1–4 times per year)Control over income✅ Yes: sell ETF shares whenever you want❌ No: you are "subject" to dividend paymentsNo tax frictions✅ Yes❌ NoPassive investing✅ Yes (dividends automatically reinvested in the same fund)❌ NoFavorable tax on foreign dividends (withholding tax)✅ Yes (optimizations by management company)❌ No (too complex for individuals)Favorable tax base✅ Yes (taxed only on gains)❌ No (taxed on total amount withdrawn)
In a CTO, investing in an accumulating ETF is more relevant than a distributing ETF because:
Note: In tax-advantaged accounts (life insurance, PEA, PER), the choice between accumulating and distributing ETFs has no decisive fiscal impact. However, choosing an accumulating ETF provides greater flexibility and supports a truly passive investment strategy.
An accumulating ETF is designed for a single purpose: pure capital growth.
Mechanism: When an ETF holds hundreds of stocks (e.g., MSCI World), it receives dividends paid by these companies (Total, Apple, LVMH, etc.). In an accumulating fund, the management company (Amundi, Lyxor, iShares...) does not pay this money to you. Instead, it automatically reinvests it within the fund to purchase more shares.
Result: The value of your ETF share increases mechanically, not only due to stock price growth but also through dividend reinvestment. This is the most powerful engine of long-term investing: compound interest. Dividends you never touched generate further gains, creating a snowball effect that accelerates over time.
It’s a 100% passive strategy, ideal if your investment horizon is long and you are in the wealth accumulation phase.
A distributing ETF takes a different approach. It is designed to provide you with a regular income stream.
Mechanism: The ETF receives the same dividends as its accumulating counterpart. But instead of reinvesting them, the management company distributes them directly to you. These payments (or "distributions") occur at a defined frequency: quarterly, semi-annually, or annually.
Result: You receive passive income in cash. The dividend is paid into a different account depending on the investment container:
Therefore, the value of your ETF share only benefits from the price changes of the underlying stocks.
The distribution type (accumulating or distributing) is included in the ETF name. Example: Amundi MSCI World SRI Climate Paris Aligned UCITS ETF Acc.
AttributeDetailsManagement companyAmundiBenchmark indexMSCI World SRI Filtered PABEuropean directiveUCITSDistribution typeAcc (accumulating)ISINIE000Y77LGG9
This ETF has a distributing counterpart: Amundi MSCI World SRI Climate Paris Aligned UCITS ETF Dist (IE000004V778), with annual distribution.
ETF performance depends on two factors:
Example: The annualized performance (2012–2025) of the World SRI ETF reaches 12.5% (source: MSCI World SRI Filtered PAB). Dividends account for about 1.5%, while stock price growth explains the remaining 11% (12.5% – 1.5%).
Price changes reflect supply and demand. Buying and selling of ETF shares mainly occurs in the secondary market with a generally stable share supply. More demand → higher price; less demand → lower price.
Owning a stock entitles you to a dividend (share of profit, distributed or not each year).
Contrary to popular belief, dividends are not free money. On the ex-dividend date, the stock price theoretically drops by the dividend amount.
Example: A company worth €100 detaches a €5 dividend → price adjusts to €95.
Management companies typically consolidate portfolio dividends and pay them 1–4 times per year.
In all cases, investors benefit from dividends; only the distribution policy differs:
Here is a comparison table showing the best life insurance policies, PER contracts, and PEA accounts (tax-advantaged), as well as the best CTO (non-tax-advantaged) for investing in a distributing ETF.
FeatureBest PER and Life InsuranceBest PEABest CTOTax-advantaged account (taxed only on withdrawal)✅✅❌Where dividends are investedIn the same distributing ETF or euro fund (low yield, capital guaranteed)Cash accountSamePurchase fees0.10% per investment€0 per order (if scheduled investment via Trade Republic)SameSustainable and ESG World ETF / traditional World ETF available✅✅ (no “green” World ETF available on PEA)✅Annual management fees0.5%0%0%Tax benefits during lifetime✅ After 8 years, capital gains exempt from income tax (up to €4,600 single / €9,200 couple)✅ After 5 years, capital gains exempt from income tax (only social contributions of 17.2% apply for PEA)❌Tax benefits in case of death✅❌❌ (donations and usufruct possible)Investment limitsLife insurance: unlimited; PER: 10–15% of annual income (under conditions)€150,000UnlimitedFree scheduled investment✅✅✅Examples of best accountsLife insurance: Linxea Spirit, Linxea Spirit PERPEA: Trade Republic, Fortuneo, Bourse Direct, Saxo, XTB, Interactive BrokersTrade Republic
Each account type (PEA, PER, CTO, life insurance) follows the same regulations (tax-advantaged or not, tax benefits during life and death, investment limits).
In practice, the best accounts offer additional advantages compared to standard bank accounts (BNP, Crédit Mutuel, Banque Populaire, LCL, etc.):
Note: The choice of account depends on your situation and goals. For example, the PEA is the most advantageous for stock market investing during your lifetime, but it is less suitable for wealth transfer (no tax benefits on death, donations, or usufruct).
Investing in the same ETF, accumulating or distributing, via a CTO: how does it affect your capital?
Scenario: Charles invests €500 per month using DCA for 8 years (minimum long-term horizon for an equity ETF).
He considers the sustainable finance ETF Amundi MSCI World SRI Climate Paris Aligned (“green World ETF”), hesitating between the accumulating share (IE000Y77LGG9) and the distributing share (IE000004V778).
Assumptions:
YearOption 1: Accumulating ETF (12.5% annual return)Option 2: Distributing ETF (11% price increase)Option 2: Annual dividend (1.5%)1€6,905€6,801€1042€14,122€13,796€2103€22,254€21,561€3284€31,417€30,181€4605€41,743€39,749€6056€53,379€50,372€7677€66,489€62,163€9478€81,263€75,253€1,146
Total invested / received
Total gains
Flat tax (30%)
Net capital after tax
Net capital per option
Net IRR per option
In a CTO, the accumulating ETF (option 1) outperforms the distributing ETF (option 2) by approximately €1,010 after 8 years for the same ETF: 71,284 – 70,274.
Moreover, the net IRR is 11.05% (accumulating) vs. 10.66% (distributing).
Why? Compound interest is slowed down in distributing ETFs because dividends (1.5%) are not reinvested. In a CTO, dividends are taxed immediately (no deferral), creating a tax friction.
Thus, in a CTO, to maximize financial performance, it is advisable to invest in accumulating ETFs rather than distributing ones.
In tax-advantaged accounts (PEA, PER, life insurance), the choice between accumulating and distributing is less important.
At Homaio, carbon allowances are treated like accumulating assets. These are bonds backed by European emission allowances (EUAs), without coupon payments. Each bond removes one ton of CO₂ from the market and is accessible directly (tax treatment similar to a CTO).
For a global wealth strategy, you can invest up to 10% of your portfolio in carbon allowances. Depending on your life goals and risk profile, the rest can be allocated to:
How are dividends from distributing ETFs managed?
Depends on the account:
Should I buy accumulating or distributing ETFs?
For a CTO, accumulating ETFs are recommended.
What is the tax impact of choosing accumulating vs. distributing ETFs?
Depends on the account type. In a CTO, distributing ETFs are immediately taxed, and annual tax reporting is required.
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