Fund tracking error refers to the difference between the actual rate of return of the fund and the rate of return of the tracking index. Generally speaking, it is the difference between the performance of the fund and the market performance it tracks. Fund tracking error is an important index that fund investors should pay attention to, because it can reflect the management ability of fund managers and the risk level of funds.
The fund tracking error is caused by many factors, the most important of which is the investment decision of the fund manager and the operating cost of the fund. Fund managers may make wrong investment decisions, or because the fund scale is too small to obtain sufficient liquidity, which leads to the increase of fund tracking errors. The operating cost of the fund will also affect the performance of the fund. These expenses include management fees, custody fees and transaction fees.
In order to reduce the fund tracking error, investors can take some measures. Investors should choose larger funds, because larger funds usually have better liquidity and lower operating costs. Investors should choose funds that track the index, because the performance of these funds is usually more stable than that of actively managed funds. Investors should pay attention to the experience and management ability of fund managers to avoid the increase of fund tracking error due to poor management.
Fund tracking error is an important index that fund investors should pay attention to. Investors should carefully evaluate the experience and management ability of fund managers in order to choose funds with stable performance and controllable risks. Through reasonable investment strategy and choice, investors can reduce the tracking error of funds and get better return on investment.
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