There may be many different index funds that track the same index, and their performance should be the same. But why are some index funds very different?
The stocks invested by index funds tracking the same index are the same, and their performance should be similar in principle. However, the following situations will affect the actual performance of index funds.
1. Enhanced Index Fund
Some enhanced index funds will obtain some excess returns, so their performance will be better.
2. Tracking error
The tracking error of some funds is relatively large, which leads to the fund losing the index. This situation is common in index funds investing in overseas markets.
3. Frequent short-term operation
Sometimes when index funds are purchased in a short term, too many redemptions will also have a certain impact on the changes in the net value of index funds.
The above is the basic reason for the different performance of index funds tracking the same index. When we choose funds after understanding the differences, we must correctly look at the fluctuations of funds and choose index funds with higher returns.
