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IntermediateStock Alerts + Tools0:45Portfolio

How Far a Fund Wanders

Tracking error measures how much a fund's returns differ from its benchmark, and low is only good if tracking was the point.

0:45 · 6 scenes

This lesson is part of a Stock Alerts + Tools plan.

What the lesson covers

  1. 0:00Tracking error measures difference from a benchmark, in either direction.
  2. 0:05The measure. The volatility of the difference between the fund's returns and the index's.
  3. 0:14Where low is the goal. For an index fund, any tracking error at all is a cost being paid.
  4. 0:23The closet indexer. An active fee with a passive tracking error means you are paying for nothing.
  5. 0:32Where index tracking error comes from. Fees, cash drag, and the cost of trading when the index rebalances.
  6. 0:40Judge it against what the fund claimed it was doing.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
How Far a Fund Wanders — MAD Academy Training Video · MadStockAlerts