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  3. Tracking Error
GlossaryETFs & Index Funds

Tracking Error

The variability of a fund's periodic returns relative to its benchmark, usually measured as an annualised standard deviation. Tracking difference is the return gap itself; a consistently lagging fund can still have low tracking error.

Appears in these guides

  • Leveraged ETFs: Daily Targets and Multi-Day CompoundingETFs & Index Funds
  • SPY: The S&P 500, the Fund and the Traded ShareETFs & Index Funds
  • What Is An ETF?ETFs & Index Funds

Related terms

Accumulating FundActive ManagementBenchmarkDistributing FundETFExpense RatioIndexIndex FundMutual FundNAV

Related lessons

advancedETFs & Index Funds

Inverse ETFs: Negative Exposure, Daily Targets and Hedge Limits

Separate a daily inverse fund from a fixed short sale, calculate negative-target compounding and examine why a simple offset need not remain matched over time.

intermediateETFs & Index Funds

IWM: Small-Cap Exposure and Index Reconstitution

Use IWM to study small-cap benchmark boundaries, changing constituents and fund tracking, with worked examples of weighted losses, turnover and transaction prices.

intermediateETFs & Index Funds

QQQ: Nasdaq-100 Eligibility, Weighting and Overlap

Read QQQ through its benchmark rules, current fund structure and underlying exposures, then calculate weighted contributions and overlap without treating a ticker as a forecast.

Ironclad Research provides educational content only. Nothing on this platform is financial advice, a recommendation, or an offer to buy or sell any security. Always do your own research and consider professional advice before making financial decisions.