Index fund tracking error screener November 2022

Published: November 14, 2022 at 6:00 am

Last Updated on December 18, 2022 at 9:43 am

This is an index fund screener based on tracking error and returns difference wrt benchmarks (aka tracking difference). The screener will help users evaluate how efficiently an index fund has tracked its underlying benchmark. It will also help a understand how tracking a midcap index or the Nifty 100, 500 is quite different from tracking the Sensex or the Nifty.

The index fund screener is a simple Excel file that can be opened in any spreadsheet utility. It has two sheets. (1) “Returns Index Funds”. This compares the trailing returns over the last 1,2,3,4,5,6,7 and 8 years of  40+ index funds and their corresponding benchmarks. The return difference (fund return minus index return) is listed. Actual return differences are more intuitive than tracking errors.  (2)  The tracking error of these 30+ index funds over the last 1,2,3,4,5,6,7 and 8 years is also provided.

The tracking error is the standard deviation of the index fund minus index monthly return differences. The lower the tracking error, the more efficiently the fund follows the index. Unlike returns, tracking error data over multiple durations is hard to find.  Also, many investors do not seem to appreciate that the tracking error depends on the duration. This screener hopes to change that.

We have already pointed out that lower expenses do not mean lower tracking errors while selecting index funds! With the TER of index funds starting to fluctuate, return differences are a better way to choose or track index funds.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

How to use the Index fund tracking error screener?

Investors should not look for funds with the lowest tracking error or lowest return difference.  That would be too narrow. Instead, they should focus on funds consistently in the top 5 or even the top 10 in low tracking error and/or return differences.

Cast a broad net and choose one. Monthly updates of this screener will tell you how the tracking error has worsened after a TER increase.

This is a screenshot of the file. The top and bottom panels represent the two sheets available.

Screenshot of the Index fund tracking error screener
Screenshot of the Index fund tracking error screener
  • If this quantity is positive, then the fund has outperformed the benchmark! This is typically a red flag. I would avoid such funds.
  • The tracking error is always positive, and you can screen by the lowest tracking error.
  • The fund return minus index return requires some attention. Some examples are given below.
Fundindexfund return minus index returnNotes
-0.80%-1%0.20%not ok
-3%-1%-2.00%not ok

The user will need to look for funds with a return difference greater than, say, -2% and less than 0%.  This can be accomplished with the Excel filter shown below.

How to use the Index fund tracking error screener
How to use the Index fund tracking error, screener

This is summarized in this video

What about ETFs? It is quite easy and tempting to compute the tracking error of ETFs with their NAV. However, this can be seriously misleading because their price and not NAV determine ETF returns.

So ETF tracking should be done with price data and not NAV. Everyone uses NAV for computing returns and tracking ETF errors, which is useless for investors.

Our ETF tracker-based ETF price and ETF NAV is now available! The freefincal ETF tracking error screener.

Get the Index fund tracking error screener

  1. This screener costs Rs. 111 and is meant for personal use only.  The cost is only for the current month and the data in the sheet.
  2. Inside, you get discounted links to our two courses: How to get people to pay for your skills (aka earn from skills) and the lectures on goal-based portfolio management.
  3. While freefincal will do its best to publish updated screener sheets each month, it cannot guarantee it.
  4. The file contains no buy or sell recommendations and only has the abovementioned data.
  5. Enough care and effort have been put in to weed out errors. However, we cannot guarantee that the sheet is free of error.
  6. The buyer will have to research using the information in the spreadsheet. No recommendations or assistance are included in the sheet and will not be provided separately.
  7. We will not provide any further help or assistance in using the sheet.
  8. The sheet purchased is for personal use and should not be shared privately or publicly. 

Click here to pay Rs. 111 and download (instantly) the latest  Freefincal Index Fund Tracking Error Screener.

Are you living outside India? You can pay via this Paypal link (3 USD) and mail freefincal at Gmail.

Check out our active equity fund and debt fund + hybrid fund screeners!

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)