You will pick accumulating or distributing for each fund in your plan with a reason.
Farhan's comparison sheet from lesson 3.5, Build an ETF comparison sheet, names Fund B for his shares, and he has a bond fund lined up from the same process. Grace has three holdings on her index map. Neither of them has written down which share class they will hold, and for Grace, whose dividends piled up as idle cash last year, that gap has already cost something.
This exercise settles it for every holding in your plan, with a reason you can defend. Allow about 20 minutes.
Open your index map from lesson 2.4 and your comparison sheet from lesson 3.5. Every line on the index map should now have a chosen fund. Add a new column to the comparison sheet headed "Share class", and another headed "Reason".
If you are still choosing between funds for one of the lines, finish that first. The share class is a detail of a fund you have already chosen, not a reason to pick one fund over another, unless the class you need does not exist for your first choice.
For each holding, ask one question: over the next several years, will I add to this and leave its income alone, or will I take income from it?
Most holdings for readers of this course are building. You are in your working years, putting money in each month, and every dividend should go back into the portfolio. A holding is drawing if you will spend its payouts on a planned purpose, such as retirement income, a career break or something you have written into your plan.
Then apply the trade-offs from lesson 4.2, Tax, costs and the behaviour each one encourages. Building points to accumulating, because the fund reinvests for you with no commission and no chance of the cash going idle. Drawing points to distributing, because the payouts arrive without you having to sell.
Farhan's two holdings are both building, so he writes "accumulating" for each. Grace's world fund is building. Her STI fund is drawing, because she has decided its payouts will cover a family trip each year. Her Singapore government bond fund is building.
A share class is only useful if you can buy it. Check three things.
First, does the fund offer the class you want at all? Some funds come in only one class. Many SGX-listed funds, for example, are distributing only; the fund's factsheet says which.
Second, can your broker buy it? A class listed on an exchange your broker does not cover, or covers only at a high commission, takes you back to the all-in cost from lesson 3.1.
Third, can you hold it in the account you intend to use? If part of the holding will sit in SRS or be bought through CPFIS, the list of products allowed there may be narrower. Module 7 covers those accounts. For now, note any holding where the account question is open.
Grace finds that the Singapore government bond fund she chose is offered only as distributing. She keeps the fund, because it won on her comparison sheet, and writes a rule beside it: payouts are added to her next monthly purchase, which costs no extra commission. That rule solves the problem lesson 4.2 described, where cash sits for months.
Farhan's broker supports the accumulating classes of both his funds, on the exchange he uses, in US dollars. He notes that his SRS plans in module 7 may change this for part of his shares.
The reason column is the most useful part of the sheet. A choice without a reason is easy to reverse on a whim: a friend mentions the joy of dividends arriving each quarter, or a forum thread insists one class is better. A choice with a reason makes you argue with your own past self before changing it.
Keep each reason to one line and tie it to building or drawing. Farhan's reads: "Accumulating. Building for 20+ years, and the fund reinvests at no cost to me." Grace's STI line reads: "Distributing. Payouts fund one family trip a year, as written in my plan." Her bond line reads: "Distributing, as the only class available. Payouts go into the next monthly purchase."
A reason can change when your life does. When you move from building to drawing, years from now, the share class decision comes back up. Module 8 puts it on the list for your yearly review, so it is looked at on a calendar date rather than on impulse.
With the column headings set up and your building or drawing labels decided, you have everything you need for the activity.
Add a share class column to your ETF comparison sheet and fill in your choice and one-line reason for each holding.
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