Tracking difference

Tracking difference is the distance between the return of an index fund and the return of the index it follows, measured over the same period. It is usually stated per calendar year and is normally negative, since a fund carries costs the index does not. Tracking error is a different statistic: it measures how much that distance wobbles from period to period rather than how large it is.

Why it matters

It is the number that shows what following an index actually cost, and it is not simply the ongoing charge. Tax withheld on the fund's own dividends pulls it down, while securities lending and the way a fund replicates its index can pull it back up, sometimes to less than the stated charge. Because it depends on the fund's domicile and on what it holds, two funds tracking the same index can end a year in different places. Whether that gap matters for a given holding is a question about the holding rather than a rule.

How BullBenchmark shows it

We do not publish a tracking difference figure. What is on the page is the comparison that contains the same information for the money you actually hold: the return of your fund position over the days you owned it, next to the S&P 500 and the Nasdaq 100 over exactly those days, dividends counted on both sides. A tracker that keeps falling behind the index it copies shows up there as a persistent negative verdict on that row. That per-position column is visible in the live demo.

Related terms

TER (total expense ratio) · ETF (Exchange Traded Fund) · Total return

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