index funds and tracking error

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Last Comment 2023-09-16

2023-09-15

are all index funds offered by different amc's the same? By same I mean follow the index efficiently etc.
Which website has the most accurate data of tracking error in a fund/fof/etf?

@legend101 @Watcher @Rajkotian @Jarvis.-. @LordGane

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https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9553629

WanderingGenerality

2023-09-15

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I don't know why people make such a big deal about tracking error. For me, it is a non-issue. It could go either way.

I'd much rather look at the expense ratio.

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9553650

kukdookoo

2023-09-15

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WanderingGenerality wrote:
I don't know why people make such a big deal about tracking error. For me, it is a non-issue. It could go either way.

I'd much rather look at the expense ratio.

I don't know why people think everyone thinks the same

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9554931

Rajkotian

2023-09-16

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Check here: https://www.amfiindia.com/research-information/...

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9555027

LordGane

2023-09-16

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They can't be practically same. There will be tracking error. It is not completely possible to mimic index as redemptions, investments are not predictable so there will be error. Fund manager tries to stick to the mandate but some inefficiencies exist beyond their control. It is recommended to check tracking error along with expense ratio while selecting index funds. @kukdookoo

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9555035

kukdookoo

2023-09-16

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LordGane wrote:
They can't be practically same. There will be tracking error. It is not completely possible to mimic index as redemptions, investments are not predictable so there will be error. Fund manager tries to stick to the mandate but some inefficiencies exist beyond their control. It is recommended to check tracking error along with expense ratio while selecting index funds. @kukdookoo

Thanks paji. How much tracking error is ok in an index fund?

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9555037

kukdookoo

2023-09-16

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Rajkotian wrote:
Check here: https://www.amfiindia.com/research-information/...

Thanks bro

https://www.desidime.com/discussions/index-funds-and-tracking-error?page=1#post_9555062

LordGane

2023-09-16

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kukdookoo wrote:
Thanks paji. How much tracking error is ok in an index fund?

I'm also pointing to other comment. It feels to me most are confusing tracking difference to tracking error. I suspect you meant tracking difference too though you actually used the word tracking error.

Tracking difference is the difference between the index returns and fund returns.

Tracking error compares the volatility of index and the fund.

Investors don't have control on tracking difference as it is inevitable. It is practically not possible not to have a tracking difference in mutual funds.

Cafemutual has a recent article with data. I don't know if any other site regularly gives the data.
https://cafemutual.com/news/passives/29591-inde...

Edit: As per SEBI, max 2% is allowed.