When building a portfolio, multiple levels of risk control are employed with the objective of achieving alpha with the lowest
possible tracking error.
Not exact matches
In particular I considered a number of
possible proofreading solutions in order to
track down as many typos and
errors as
possible.
Passive funds also aim to keep the
tracking error as low as
possible.
Rick Ferri wrote in his book «All About Index Funds» that 25bp below the benchmark is regarded as an ideal target.John Bogle also commented in his book «Common Sense on Mutual Funds» that the
tracking error must be as close to zero as
possible for market returns to be as close to 100 %.
I think as a DIYer it's important to learn as much as
possible about the stocks / products that you are investing in which is why I'm interested in the
tracking error.
Still, this is really by happenstance and it's quite
possible there could be more serious
tracking error in decades prior to 1948.
It is quite
possible for an ETF with a lower fee to post a higher
tracking error than a more efficient competitor.
This fund's
tracking error is already close to zero, which means it's now
possible to capture the returns of Canadian large - cap stocks at a trivial cost.
The initial announcement was very cautious and included commitments to
track down
possible error and reproduce the result, the first of which they did.