InvestorQ : What are tracker funds? It's better to invest in tracker funds or ETF's?
Aishwarya Nimbalkar made post

What are tracker funds? It's better to invest in tracker funds or ETF's?

Answer
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4 months ago


Tracker funds are investments that aim to replicate the performance of a market index. These funds generally deliver the return in line with the index they are tracking. As an investor, these could be an attractive investment as it is less expensive when compared to other investors. Risk under this investment is spread by investing in various classes of shares/securities. So, the risk is highly diversified. Tracker funds are a form of passive investment and which makes index trackers run cheaply than actively managed funds, so they have lower charges.

Tracker funds and ETFs are basically the same things, they have some merits and the same functioning. So, technically, tracker funds are ETFs (Exchange-traded funds) and the terms are sometimes used interchangeably. However, one main difference lies between the two is in investment flexibility on offer. Tracker funds are generally structured as an open-ended investment company (OEIC) or a unit trust, building a specific portfolio that reflects a particular index and is priced once a day. Whereas ETFs, just like any other share, are traded on a stock exchange, this means that prices change continuously, throughout the day.

However, if you want to choose between the two, there’s only one factor you need to decide on- whether or not you want flexibility and can you accept the changes in prices, if the answer is yes! You can opt for ETFs. If you are not sure where to invest, you can seek professional help by providing detailed info like your goals and the main motive of your investment, etc.