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Tracker fund |
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Tracker fundA fund which aims to achieve the same returns as a chosen share index, and which does this by investing in all the companies in the index according to a market value weighting. Mathematically, this ensures that the fund achieves its aims.Why would anyone invest in a fund that only tries to match the index rather than beat it? Proponents of tracker funds argue that:most active funds try to beat the index but the vast majority of them actually underperform ita fund which can guarantee that it will do as well as the index may not be the most ambitious, but its results will be better than most other more ambitious fundsbecause a tracker fund invests in a programmatic way, it does not need and army of analysts and researchers backing up its portfolio selection, and the costs are therefore cheaper.Critics of tracker funds argue that they are unsuitable for investors who want superior returns. They also argue that because of their internal rules, tracker funds which track an index like the FTSE 100, always have to buy into new entrants to the index at a 'top' price, and sell shares of companies exiting the index at the bottom.Similar MatchesBase rate tracker mortgageBase rate tracker mortgageA mortgage in which the rate of interest paid by the borrower follows movements in the base rate. Index tracker mortgageIndex tracker mortgageThe interest rate tracks an index such as the base rate or LIBOR and often has a set percentage added to it. Tracker mortgagesTracker mortgagesThey are usually linked to the Bank of England base rate, in that you pay a set margin above the current base rate level. Unlike many of the other types of rate, most tracker rates will not revert to the SVR at any point during the life of the loan. They will continue to track the base rate until you have either paid off your mortgage or switch provider or product. You can also get tracker mortgages that have discounts and stepped discounts built into them. |
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