Yes it pays out it's income but it doesn't pay out it's capital gains until realised. 99.9% of the time the index fund won't realise its capital gains and when it does the losses and gains will neutralise each other. WAM is paying out it's realised capital gains which would be a much higher proportion of the funds under control because it is actively managed. That is why WAM pays out almost double the dividend of the index fund. How else do they have similar returns yet WAM has twice the dividend?
So my point remains valid, the index fund has the benefit of compounding the capital gains as it does not pay these out.
Some home truths - Livewire contributor Chris Brycki, page-74
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