The first question was:

Is the fund an accumulation fund? If so, how do dividends get reinvested?

I was fairly sure what type of fund it was, but wanted confirmation. The second part was the bit I had misunderstood. I’d assumed it just meant that dividends, instead of being paid out, were automatically used to purchase new units. That’s not the case. Instead any distribution declared by the fund is reinvested in to the fund itself and therefore increases the value of every unit. So instead of getting more units, your existing ones go up in value.

The second question was:

If the unit price was £0.41 and I purchased £100 worth of units, I’d end up with 243 units worth £99.63. Where does the £0.37 go?

This seemed like an obvious question, but I’d made the mistake of assuming you can only buy units in whole numbers. It turns out that you can by fractions of units, so in the example above I’d get 243.90 units (I guess they round it off a little).

Note: I’ve not quoted Fidelity’s actual reply because it has one of those confidentiality clauses. Given the public nature of the answers it would probably have been fine, but it’s just not worth the hassle…

Related posts:

1. Starting out with investments