Funds
What is tracking error?
How far an index fund drifts from the index it is copying.
Explained in more detail
A perfect index fund would match its index exactly. In practice fees, cash held for withdrawals and trading costs create a small gap. Lower is better, and it is one of the few numbers genuinely worth comparing between index funds.
An example
For instanceTwo Nifty 50 funds with the same fee can still differ if one tracks less tightly.
Why this matters to you
You will meet this word in broker apps, company results and market news. Knowing what it means is not the goal on its own. The goal is being able to judge whether a number is good or bad for the investment you are actually holding.
On AlphaVik, any time tracking error appears in a view or a lesson, you can hover or tap the word and this explanation comes with it. You never have to leave the page to look something up.