By P Saravanan and Sumit Banerjee Diversification is an essential element in the investment journey. The underlying idea is to spread the amount invested in different asset classes to reduce the risk while getting maximum returns. Mutual fund is one such investment vehicle which offers a wide variety of investment opportunities across asset classes ranging from debt, equity, money market, hybrid, and the like to investors.
These fund categories are generally marked to different benchmark indices for comparison purposes. Thus, it is essential for the investors to assess how well the fund is performing compared to the benchmark. To do this assessment, tracking error of the fund comes very handy. Let us discuss the same in detail.
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