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Tracking Error
Basics
O que significa
How closely an ETF follows the performance of its target index. Lower tracking error means the ETF is doing a better job of replicating the index returns (before fees).
Exemplo
If the S&P 500 returns 10% in a year and an S&P 500 ETF returns 9.9% (after a 0.03% expense ratio), it has very low tracking error. If it only returns 9.0%, it has high tracking error.
Erro comum de iniciantes
Beginners assume all ETFs tracking the same index perform equally. Higher expense ratios, poor replication strategies, or illiquid holdings can cause some ETFs to underperform the index they track.
Termos relacionados
- ETF — Exchange-Traded Fund: A type of investment fund that trades on a stock exchange, just like…
- Expense Ratio — The annual fee an ETF or mutual fund charges to manage your money, expressed as a percenta…
- Index Fund — A type of investment fund (ETF or mutual fund) designed to replicate the performance of a …