February 8, 2024.
2 min read
Welcome to our ETF investor community! For those of you keen on minimizing risk and optimizing performance through ETFs with low tracking error and deviation, we've compiled a list of top performers in the Indian market. These ETFs stand out for their ability to closely mirror the returns of their benchmark indexes, making them excellent choices for passive investors seeking reliable growth.
After thorough research, including insights from a Cafe Mutual report, we recommend considering the following ETFs for their low tracking error:
Tracking error, the discrepancy between the performance of an ETF and its benchmark index, is a critical measure for investors. A low tracking error indicates that an ETF effectively mirrors its index, reducing the risk of underperformance.
Another vital metric is the tracking difference, which represents the real return gap between an ETF and its benchmark over time. Factors influencing this metric include fund fees, securities lending policies, diversification rules, and market liquidity. An ETF with a low tracking difference is likely to deliver returns closely aligned with its target index, enhancing the benefits of passive investing.
To deepen your understanding of tracking error and tracking difference, consider the following resources:
We hope this guide assists you on your investment journey. Our community is here to support your exploration of the ETF market. Should you have any questions or wish to share your experiences, please feel free to engage with us. Here's to successful investing!
Happy investing, and remember, we're here to help each other grow in the world of ETF investments.