Work out index fund tracking error instantly with clear inputs, formula shown and shareable results.
Tracking difference is the simple return gap against the index; tracking error is the volatility of that gap. Most of the difference should be explained by the expense ratio — anything more points to cash drag, sampling or trading costs.
Tracking measures
Tracking difference = fund return - index return; tracking error = SD of that difference
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
Tracking difference tells you what you lost; tracking error tells you how reliably the fund follows the index.
Securities lending revenue, favourable dividend timing or sampling luck can all push a fund slightly ahead of a gross index.