In this video, Ryan O’Connell, CFA, FRM, explains tracking error—a key concept in portfolio management that highlights the performance gap between a fund and its benchmark. We break down how fund fees, the number of securities, and cash holdings all contribute to tracking error in ETFs, index funds, and mutual funds. You’ll learn what tracking error means in real-world terms and why it matters for passive investors. Whether you’re studying for the CFA or managing your own portfolio, this is essential knowledge for evaluating fund performance.
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Chapters
0:00 – What Is Tracking Error? Definition & Real-World Meaning
3:15 – How Fund Fees Contribute to Tracking Error
3:54 – Tracking Error & Number of Securities in a Fund
4:31 – Impact of Cash Holdings on Tracking Error and Fund Performance
*Disclosure: This is not financial advice and should not be taken as such. The information contained in this video is an opinion. Some of the information could be wrong. This channel is owned and operated by Portfolio Constructs LLC. Some of the links above are affiliate links, meaning, at no additional cost to you, I will earn a commission if you click through and make a purchase.
