The tracking error of fund generally refers to ETF fund, which mainly depends on the deviation of ETF fund tracking index trend. Generally, the smaller the tracking error, the better. The main reasons for the tracking error are:

1, the purchase and redemption of funds will cause tracking errors, especially for large redemption applications;

2. Liquidity will cause tracking error, and fund investment will have an impact on the stock price;

3. Changes in constituent stocks will cause tracking errors, and fund managers will change positions and stocks at any time according to the market;

4. Transaction costs will cause tracking errors. Funds have management fees, and investment in stocks also requires commissions, stamp duty and transfer fees.