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02/07/24 10:47 AM

#1111 RE: fung_derf #1110

LORD! Indexes track exactly, but index FUNDS ALWAYS have some microscopic tracking error.

Indexes can't be bought directly so an investor can only approximate them via a fund like a mutual fund or an ETF. Variation in stock weighting and rebalancing is inevitable. Also funds must keep cash reserves for redemptions. Those reserves will be a slight drag in rising markets and a benefit in falling ones. Even buying all 500 (or more correctly 503) stocks in the S&P won't produce a perfect match.

I really try to help IHUBers, often uninformed gamblers, but it's not easy.

I bought my first Index fund around 1990 when very few people knew of their advantages. My two sons -- an engineer and a CPA -- have had money in index funds since right after they were born. Now, as adults, their retirement money is mostly indexed, and they have no interest in changing that.