Week 41 Day 6: Tracking Error: How Far You Deviate From the Market

Tracking error measures how much your portfolio's returns differ from a benchmark. A VTI-only portfolio has nearly zero tracking error relative to the U.S. market. A portfolio with international stock...

Tracking error measures how much your portfolio's returns differ from a benchmark. A VTI-only portfolio has nearly zero tracking error relative to the U.S. market. A portfolio with international stocks, bonds, and REITs will have significant tracking error -- sometimes underperforming, sometimes outperforming.