ITOT, for example, shows a -0.13% maximum downside tracking error over a 12-month period and a median tracking error of -0.08%. Meanwhile, SCHX has a maximum downside tracking error of -0.03% and a median of 0.02%. While ITOT and SCHX may both have a 0.03% expense ratio, the iShares offering has exhibited greater tracking errors.
Along with implicit costs to trades, investors should also know what kind of market exposure they are comfortable with. Since no two ETFs are exactly the same, two similar sounding ETF strategies will hold different weights to company stocks and market sectors.
“Fees are part of the equation, but many long-term ETF investors often consider the index, performance and tax efficiency of their ETF investments,” a BlackRock spokeswoman told CNBC.
For instance, effective December 18, 2015, ITOT will track the new S&P Total Market Index. The S&P Total Market Index includes greater small- and micro-cap exposure and will cover more than double the component holdings of the fund’s current benchmark, the S&P Composite 1500 Index. Consequently, due to its broader market exposure, the new benchmark may be slightly less top heavy.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.