Glossary · Costs
Tracking difference
How far a fund’s return differed from the return of the index it tracks over a period — usually a small shortfall close to its charges.
Tracking difference is the fund’s return minus the index’s return over the same period, with income treated the same way in both. A fund charging 0.10% a year would, other things equal, trail its index by about that much; trading costs, tax withheld on dividends and income from lending securities move the figure up or down.
Tracking error is a different measure: how much that difference varies from one period to the next. A fund can have a steady shortfall (low tracking error) or one that swings around (high tracking error).
Comparing tracking difference across funds that follow the same index shows the cost of owning each more fully than the ongoing charge alone. Index returns are licensed data, so this site does not show an index line of its own.
Related terms
- Index fundA fund that aims to match the return of a market index, such as the FTSE 100 or the S&P 500, by holding the shares or bonds in it.
- OCFThe annual cost of running a fund, expressed as a percentage of the money you have invested in it.
- BenchmarkAn index a fund’s performance is measured against, stated with its own currency and return basis.
- TERAn older measure of a fund’s yearly running costs, still quoted by many ETF providers and broadly comparable with the ongoing charges figure.
More terms on costs
Definitions describe how a term is used on Fundology. This is information, not advice.