Definition of index tracker

Index trackers are mutual funds or OEICs (open ended investment companies) that track the performance of an index by buying and selling its constituent stocks so that if a certain stock represents 3 per cent of the index, it will also represent 3 per cent of the value of the portfolio. They differ from ETFs which are listed on stock markets and can therefore be traded throughout the trading day. An index tracker is known as a passive investment, because no active decision is made to own more of a particular stock. The decision is made by the movement on the index itself.

 

index trackers in the news

In January 2013, the FT's investment writer considered two passive investment products in order to gain exposure to the US stock market. HSBC's North American index tracker which had a total expense ratio of 0.3 per cent is an open ended investment company. While Vanguard's US Equity Index fund, also an OEIC, carried a TER of 0.2 per cent. Both funds were index trackers, rather than ETFs.