Tracking Error Vs Tracking Difference In Index Fund Quick Guide In simple terms, the lower the percentage of tracking error and tracking difference, the better is the fund. in large cap, sbi nifty index fund has the lowest tracking error of 0.02%. it is followed by hdfc nifty 50 index fund at 0.03%. Investors need to consider tracking difference and error to understand a fund’s performance comprehensively. by considering these factors, investors can better evaluate the effectiveness of different passive fund options tracking the same index and make appropriate investment choices.
Tracking Difference Vs Tracking Error Of Etf And Index Funds Tracking difference and error indicate how well an index fund follows its intended path. here's how to avoid common analytical mistakes. download the report now. Comparing tracking error across different index funds involves analyzing how closely each fund replicates its benchmark index. funds with lower tracking error are generally more efficient, indicating minimal deviation from the index’s performance. An analysis done by cafemutual on index funds shows that 15 out of 140 index funds recorded a tracking error of less than 0.06%. tracking error is the annualized difference between the standard deviation of the fund and its benchmark. Tracking error in index funds directly impacts investor outcomes by indicating the deviation of a fund’s performance from its benchmark index. higher tracking error often signifies less precise replication, which can lead to unexpected gains or losses compared to the index.
Tracking Difference Vs Tracking Error Of Etf And Index Funds An analysis done by cafemutual on index funds shows that 15 out of 140 index funds recorded a tracking error of less than 0.06%. tracking error is the annualized difference between the standard deviation of the fund and its benchmark. Tracking error in index funds directly impacts investor outcomes by indicating the deviation of a fund’s performance from its benchmark index. higher tracking error often signifies less precise replication, which can lead to unexpected gains or losses compared to the index. While tracking difference and tracking error are widely used in the investment industry as performance measures for index funds and exchange traded funds (etfs), they are not without their limitations. Tracking error in index funds can be classified primarily into two types: statistical tracking error and fundamental tracking error. statistical tracking error measures the volatility of the difference between the fund’s return and the index’s return over a specific period. A low tracking error suggests the fund is effectively tracking its benchmark, while a high tracking error indicates discrepancies in returns. understanding this concept is essential for investors seeking passive investment exposure with minimal divergence from the index. Tracking error quantifies the deviation of an etf’s performance from its benchmark index, while tracking difference measures the percentage return gap between the etf and that benchmark.
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