INCOME TAX15 Sept 2026
When should you switch an index fund? 4 things investors must check before moving to another fund | Mint
Two index funds tracking the same Nifty 50 can still give you different returns. Small gaps in costs, idle cash and trade execution cause this. Experts say compare tracking difference and tracking error over three to five years before switching, instead of chasing short-term returns or the lowest expense ratio. If one fund keeps lagging its peers, that may point to a management problem.
Key Statutory Highlights
- Index funds tracking the same benchmark can deliver different returns because of costs, execution and portfolio management.
- Tracking difference is the gap between the index return and the fund return over a period, while tracking error measures how consistently the fund's returns deviate from the index.
- Most index funds tracking major Indian benchmarks charge roughly 0.05% to 0.4% a year, so the lowest expense ratio alone should not decide a switch.
Actionable Advice for Taxpayers / Founders:Check your index fund's tracking difference and tracking error over a three-to-five-year period against other funds on the same index before you switch, and speak to a financial adviser if the gap looks large.
Statutory Disclaimer: TaxQue Shorts are AI-assisted editorial briefs for compliance awareness. This brief has not passed every source check; confirm the original notification before acting. This does not constitute formal legal or CA counsel.
TaxQue News Desk
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