Portfolio
The tracking difference is the actual return gap between an ETF and the index it tracks, and unlike the TER it also captures costs and income such as securities lending.
Tracking difference measures the actual deviation of an ETF's return from its index return over a given period. It is more meaningful than the TER because it accounts for all costs and income (for example, from securities lending).
A negative tracking difference means the ETF outperformed expectations (which can arise from securities-lending income). A positive tracking difference indicates a return shortfall.
A practical note: compare tracking differences over several years on platforms such as trackingdifferences.com before choosing an ETF.
See taxes, dividends and allocation for your whole portfolio in one place.