DEFINITION of 'Accumulation'
1. An individual investor's cash contributions to invest in securities over a period of time in order to build a portfolio of desired value. Dividends and capital gains are also reinvested during this process.
2. An institutional investor's purchase of a large number of shares in a public company over an extended period of time.
3. The retention of company profits in corporate finance for reinvestment in business operations, as opposed to the payout of earnings as dividends to shareholders.
BREAKING DOWN 'Accumulation'
1. When an individual investor is attempting to build up the value of a portfolio, he or she is said to be accumulating wealth. The reinvestment of profits over the course of the investment time horizon can greatly boost the pace of accumulation through the benefits of compounding.
2. Large investors and financial institutions are limited in their ability to move in and out of securities because they deal with large numbers of shares that would drive the price of a security up if ordered all at once. In order to buy their intended number of shares, institutional investors spread their accumulation of shares over a period of time.
3. As opposed to paying dividends out to investors, accumulation of earnings within the corporation boosts business expansion and growth and may produce extra value for shareholders in the long run.