A better way to measure tracking error of index funds and ETFs

freefincal - Prudent DIY Investing (freefincal)

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Опубликовано:

17 сен 2024

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Комментарии : 13

@gshanbhag1986 3 года назад

U just do what I want to see always haa. The amount of effort u put in is really appreciable.

@KNagendran 3 года назад

If I am buying and holding the ETF for many years, then what difference does few percentage point difference in total return going to make? Eg, if the index fund returns 100% in 8 to 10 years, then would it really makes a difference if my actual gain is 97% or 103%? The problem with price and NAV difference seem to be an issue if only I trade in and out of investment regularly at short interval. Is there any evidence of index fund consistently outperforming or underperforming index ETF when calculating rolling 7 year return or 10 year return? If there is no consistent outperformance or underperformance, how does choosing index fund or etf going to make any difference.

@pattufreefincal 3 года назад

Excellent logic! ETFs are very good product for buying and holding. If you want to buy and sell (I hope that is the plan) after many years then you would know the difference bet price and NAV. Any loss is a loss only when you think it is so.

@KNagendran 3 года назад

@@pattufreefincal The impact cost of selling ETF in India is true only at present and I think it is because it is a relatively new product in Indian market. I bet it would be considerably different after a decade. And the main point I want to ask is how are you certain that I would be making a loss for sure (even a small percentage) when I sell much later for retirement. Isn't there a chance also of making profit (if I sell using limit order and the difference between price and NAV persists)?

@pattufreefincal 3 года назад

@@KNagendran Yes when we want to sell things will become magically favourable

@KNagendran 3 года назад

@@pattufreefincal Lol. No need to be so sarcastic. I was trying to say that there is no definitive proof you have given that returns of ETF are less (or more) than index fund over long period. ETF has another advantage which you don't mention. They can be transferred easily (say to your children, parents or non-income tax paying members) from which they can save payment of LTCG tax. As far as I know it isn't possible to transfer/gift mutual fund units. One can increase return by transferring ETF to (say their college going children) instead of personally paying LTCG tax and save considerable amount of money (at least around 5% of total value of ETF transferred).

@pattufreefincal 3 года назад

@@KNagendran I have given enough evidence of this enough no of times. Please ignore and invest and hope. Good luck