The SEC warns that a fund may not fully replicate an index because of its composition, expenses and other features.[30](#source-cm-index)[32](#source-cm-fund-types) A tracking difference must state the subtraction direction, dates, currency, treatment of distributions and expenses. Comparing a fund’s NAV with an index and comparing the price of a personal transaction with an index answer different questions.
Interpretation
One difference over a period does not describe the variability of deviations within that period. Average closeness can coexist with marked inconsistency. Nor can every discrepancy be attributed to management if one side includes distributions and the other does not. The method should be named before the number is interpreted.
[Replication and tracking](/guides/index-replication-tracking/) separately shows the difference in results and the standard deviation of its own series. This is not a ranking of available funds and not a promise that historical underperformance will continue.
General concepts; terms of specific contracts and jurisdictions must be checked separately.
Source references and links retained: SEC.[30](#source-cm-index)[32](#source-cm-fund-types), [Replication and tracking](/guides/index-replication-tracking/); subtraction direction, dates, currency, distributions, expenses, NAV, personal transaction price, variability and historical-underperformance caveats preserved.
Educational material is not individual investment, legal or tax advice.
