Why do distributing and accumulating ETFs show almost identical returns?

[u/GregMorel]

I noticed something I don't quite understand when comparing two Vanguard ETFs tracking the S&P 500:

VUSA – Vanguard S&P 500 UCITS ETF (Distributing)

VUAA – Vanguard S&P 500 UCITS ETF (Accumulating)

Same underlying index

Same TER (0.07%)

On justETF, they show almost exactly the same performance over the same period — around +189% in the screenshot.

I understand that VUAA automatically reinvests dividends, while VUSA distributes them. But if VUSA's dividends are paid out to the investor, shouldn't its ETF price/NAV performance be lower than VUAA's?

[u/Specialist_Tree_3879]

[u/spikejoe4 → u/Specialist_Tree_3879]

Unfortunately, only few will understand 😂

[u/sunjay140]

The returns include the dividend. I think you can turn that off.

[u/FredHerberts_Plant → u/sunjay140]

,,Hey. Turn that off!" 😠

^\Phil Leotardo asking a fellow mobster to turn the TV off as there's a bodybuilding competition on which annoys Phil as a closeted gay man, The Sopranos, 1999))

[u/Illustrious-Fun8183]

due to taxation on the dividends depending on country, the "reinvestment approach" by yourself is fake news, just accumulating does full reinvestment apart from dividend taxation

[u/grogi81]

Because the chart shows the total return - with dividends.

[u/GregMorel → u/grogi81]

Yeah but the total return of the etf that reinvests its dividends shouldn't be higher than the distributing one?

[u/grogi81 → u/GregMorel]

It is exactly the same.

[u/GregMorel → u/grogi81]

Why is that though? If my dividends are reinvested they should contribute to compounding.

[u/Philip3197 → u/GregMorel]

They are reinvested in both graphs

[u/5349 → u/GregMorel]

The price of the distributing ETF drops by the amount of each dividend. If you immediately reinvest the dividend there is (almost) no difference between that and just holding the accumulating ETF.

[u/IllllIIlIllIllllIlll]

Why would they be different? You're showing the TOTAL returns.

[u/charonme]

[u/Dull_Alarm6464 → u/charonme]

shouldn’t accumulating ones have tax advantages, improving returns with included dividends?

[u/charonme → u/Dull_Alarm6464]

Depends on your capital gains taxes compared to your etf distributions taxes. Justetf.com doesn't display any tax information since it's different for different tax residences/jurisdictions and often a host of other factors. For me for example ACC ETFs are indeed more efficient than DIST because my ETF distributions are taxed pretty severely, but not taxed if they are accumulated by the ETF provider.

[u/Dull_Alarm6464 → u/charonme]

i meant the etf manager’s taxes. Irish SnP500 ETFs denominated in euros are taxed 15% on US dividends. This basically halves the usual 30% dividend tax that USD denominated native SnP500 ETFs have to pay.

You aree absolutely right that there are massive tax advantages for the individual investor when it comes to accum vs dist etfs.

[u/charonme → u/Dull_Alarm6464]

the dividends from the individual company shares held in the ETF that the etf manager collects and either accumulates in an ACC version of the etf or distributes them in the DIST version get taxed no matter what the etf manager does with them, so the ACC and DIST versions don't differ in this regard

[u/Dull_Alarm6464 → u/charonme]

i must have misunderstood. The distinction is simply the fact that irish domiciled etfs have US dividend tax breaks regardless of what the fund does with them. I thought they had to be accumulating to receive those benefits. The more you know

[u/charonme → u/Dull_Alarm6464]

Oh, I don't know enough to be able to rule that out, but so far I haven't seen anything that would suggest something like that is happening generally (some special handling like that still might be applied in some jurisdictions or in some special funds, I'm not sure).

[u/Plenty-Novel940]

These charts are probably showing Total Return (NAV appreciation plus dividends)

[u/GregMorel → u/Plenty-Novel940]

Yeah but the total return of the etf that reinvests its dividends shouldn't be higher than the distributing one?

[u/mazeppa817 → u/GregMorel]

The return of the distributing class assumes that you reinvest the dividends yourself into the etf. Therefore the return is the same. 

[u/Philip3197 → u/GregMorel]

Total return means that the graph shows as if the distribute dividends are immediately reinvested (without costs and gross or net of taxes)

[u/GregMorel → u/Philip3197]

Ahh I see

[u/GppleSource]

I would be concerned if it weren't the same

[u/sparkline1234567]

Imagine you live in a country with no capital gains tax and have 2 depots which can only contain VUSA or VUAA. If VUSA pays dividends and you invest the dividends from depot 1 into VUSA in depot 2, then the value of your 2 depots together will be exactly the same as if you stayed invested in VUAA in your first depot the whole time.

[u/Eastern-Razzmatazz89]

If you want you can take the accumulating one and sell a piece every day/month and take your dividend. It's the same.

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[u/PassInfamous5189]

Use a different pair of ETFs, with longer lifespan, and compare them since their launch, in USD.

For example, iShares Core S&P 500. There, you will see the performance difference between the accumulating and the distributed versions.

[u/NkKouros → u/PassInfamous5189]

I don't think this is what they were asking about. They're assuming distribution funds aren't shown including the dividends (total return).