Tracking difference
The realized return gap between an index fund and its benchmark.
Plain languagePractical exampleConnected reading
01
What is it?
The realized return gap between an index fund and its benchmark.
02
Why does it matter?
It captures fees, tax, trading costs, cash and sampling effects.
03
How should it be read?
Compare using the same total-return definition and period.
04
Common mistake
Looking only at the stated fee while ignoring the realized gap.
A simple example
If the index returns 10% and the fund 9.6%, tracking difference is minus 0.4 points.