NISM-Series V-A: Mutual Fund Certification Exam Notes
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The difference between an index fund's return and the market return is the tracking error
When an Indian investor invests in equities abroad, he is essentially taking two exposures - An exposure on the international equity market & An exposure to the exchange rate of the rupee.
If the investor invests in the US, and the US Dollar becomes stronger during the period of his investment, he benefits; if the US Dollar weakens (i.e. Rupee becomes stronger), he loses or the portfolio returns will be lower.
Purchase and sale of securities entails broking costs for the scheme. Frequent churning of the portfolio would not only add to the broking costs, but also be indicative of unsteady investment management.
Portfolio Turnover Ratio is calculated as Value of Purchase and Sale of Securities during a period divided by the average size of net assets of the scheme during the period
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