Skip to Content
The Short Answer

Same Index, Different Returns

Some index funds and ETFs tend to outperform their peers for a handful of reasons.

Mentioned: , , , , , ,

Question: I've been shopping around for index funds and noticed that mutual funds and exchange-traded funds that track the same index often have different returns. Why is this?

Answer: Indexing--investing in funds or ETFs that closely track a given stock or bond index--has become an increasingly popular investment strategy, with about $55 billion in new assets added to index mutual funds (not including ETFs) during each of the last three years, according to the Investment Company Institute. The popularity of indexing has helped spur the growing interest in exchange-traded funds, the majority of which track indexes. But, as you note, not all index funds and ETFs are created equal. In fact, there are a few different factors that cause some funds or ETFs to track their indexes more closely than others.

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.