With the tax-free ISA deadline on the horizon, now is a good time to focus on making the most of your investments. 
One way to really put your cash to work is through the power of compounding – in other words, reinvesting any income you make on an investment back into your portfolio. The performance of your investments will snowball, given the amount of money you're investing should increase exponentially overtime.
The difference between reinvesting dividends and pocketing the income can be significant. According to research from Schroders, a £10,000 investment in the FTSE 100 on 31 December 1999 would, by November 2017, have earned investors an additional £2,040 on top of their original amount of money. This is an annual growth rate of 1.1 per cent.
In contrast, had the dividends of the FTSE 100 companies been reinvested, the same £10,000 investment would have earned them £11,930, which amounts to an annual growth rate of 4.6 per cent.
We take a look at funds which have stood investors in particularly good stead, had they reinvested their income payouts. We ran the data over five years, as this is often deemed to be a relatively long-term time horizon, yet is perhaps a more realistic holding-period expectation than the aforementioned 18 years!
Liontrust Monthly Income Bond
This fund has been managed by Stuart Steven since its launch 2010, who was joined by co-managers Aitken Ross and Kenny Watson in 2014 and 2015 respectively. The team invests mostly in corporate bonds with the primary aim of paying out 12 distributions per year.
Had an investor placed £10,000 into the fund five years ago, they would have received £2,748.68 in income, or 27 per cent of the original amount they invested.
This is an attractive stream of income, especially given that the managers have invested in shorter-dated bonds (which tend to have lower yields) since launch in order to reduce interest rate sensitivity. That said, the managers do have the ability to hold longer-dated assets as and when interest rates normalise.
Had investors reinvested their distributions, on the other hand, they would have earned a total return of 30.56 per cent over five years to 14 March. This would have earned them an additional £516 over this time frame.
Because of its attractive income payouts, Liontrust Monthly Income Bond has managed to significantly outperform its average peer in total return terms over one, three and five years.
It has a clean ongoing charges figure (OCF) of 0.64 per cent and yields 5.63 per cent.
Premier Multi Asset Monthly Income
Next up is Premier Multi Asset Monthly Income, which is headed up by David Hambidge, Ian Rees, David Thornton and Simon Evan-Cook.
As with the aforementioned Liontrust fund, it aims to provide a monthly pay-out for investors in real terms – in other words, to provide an income stream without sacrificing capital.
Premier Multi Asset Monthly Income is able to invest across a wide range of asset classes (which it does through a portfolio of funds rather than individual assets), although it can only hold between 20 per cent and 60 per cent of its portfolio in equities at any one time.
If an investor had placed £10,000 into the fund five years ago, they would have received £2,494.41(or 24.9 per cent) in income and seen capital appreciation of 11.85 per cent.
In contrast, investors who had reinvested their income would have earned total returns of 40.87 per cent on their initial £10,000 investment. In monetary terms, that equates to an extra £409 more than had they taken the income.
Premier Multi Asset Monthly Income has beaten its average peer and benchmark over one, three and five years. It has a clean OCF of 1.29 per cent and yields 4.71 per cent.
Threadneedle UK Equity Income
On the equity side, Richard Colwell's Threadneedle UK Equity Income fund pays out four dividends per annum. The manager aims to outperform the FTSE All Share by between 2 to 3 per cent per annum over rolling three-to-five year periods on a total return basis.
He looks to do so through a portfolio of mostly large-cap companies, which are chosen based on their management strength, the growth sustainability of their business models and their ability to convert earnings streams into cash flows.
Again, using the £10,000 initial investment model and running it over five years, investors would have pocketed £2,332.82 in income – 23.33 per cent of the original amount they invested - and seen capital growth of 24.86 per cent.
However, if investors had reinvested the dividends paid out to them over this time frame, they would have seen gains of 52.77 per cent or, in monetary terms, £5,277. This is a £458 difference.
Threadneedle UK Equity Income has a clean OCF of 0.82 per cent and yields 4.2 per cent.
Darius McDermott is managing director of FundCalibre. All views are his own and should not be taken as investment advice. All views are his own and should not be taken as investment advice.