Costs & Tracking

How to judge whether an index fund does its job: expense ratio, tracking difference, tracking error and trading costs, with a real side-by-side of two S&P 500 funds.

Two jobs, one scorecard

An index fund has two jobs: follow its index closely and charge as little as possible for doing it. Because every fund tracking the same index owns roughly the same basket, the differences between them come down to cost and precision. That makes index funds unusually easy to compare.

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