Here are the index funds with lowest tracking error and tracking difference - Cafemutual.com (2024)

FAQs

Which index fund has the lowest tracking difference? ›

It's calculated in percentage terms. Among large cap funds, Navi Nifty 50 Index Fund has the lowest tracking error of 0.01% among large cap index funds followed by Navi Nifty Next 50 Index Fund with tracking error of 0.02%. In the midcap space, Navi Nifty Midcap 150 Index Fund has the lowest tracking error of 0.01%.

As you can see, tracking error is a measure of the volatility in the performance of the Index Fund. As you can see, there is significant variation in the tracking error not only between different Index Funds but also between funds tracking the same benchmark.

The tracking error is the standard deviation of the index fund minus index monthly return differences. The lower the tracking error, the more efficiently the fund follows the index. Unlike returns, tracking error data over multiple durations is hard to find.

Like the Dow Jones and the Nasdaq composite, the S&P 500 is an index of stocks. The S&P is considered by many investors to be the most accurate representation of how the overall stock market is performing, as it uses 500 stocks chosen based on size, industry and other factors to reflect a wide swath of industries.

Most of the time, the tracking error of an index fund is small, perhaps only a few tenths of one percent. However, a variety of factors can sometimes conspire to open a gap of several percentage points between the index fund and its target index.

Tracking error is not how much an ETF's performance deviates from that of its benchmark index for a given period (that's known as excess returns). It's about how much those excess returns oscillate around the portfolio's benchmark during that period.

Low errors indicate that the performance of the portfolio is close to the performance of the benchmark. Low errors are common with index funds and ETFs that replicate the composition of major stock market indices.

Lower risk: Because they're diversified, investing in an index fund is lower risk than owning a few individual stocks. That doesn't mean you can't lose money or that they're as safe as a CD, for example, but the index will usually fluctuate a lot less than an individual stock.

Shanghai Shenzhen CSI 300 Index (CSI300)

The CSI 300 is considered the blue-chip index for mainland China stock exchanges, as it tracks both the Shanghai and the Shenzhen markets.

ETF returns don't always trail their index though; tracking difference can be small or large, positive or negative. Tracking error is a related but distinct metric. Tracking error is about variability rather than performance.

Which funds have consistently beat the S&P 500? ›

That makes outperforming the S&P 500 on a consistent basis no small task. The one fund that has beaten the index in nine of the past 10 years is the Technology Select Sector SPDR Fund (NYSEMKT: XLK).

VOO typically provides a higher dividend yield compared to SPY. This aspect is particularly attractive to investors who prioritize income generation from their investments.

Each fund may track a different index or do better than another fund, and some indexes do better than others over time. Long-run performance is your best gauge to what you might expect in the future, but it's no guarantee, either.