Speaking of not carrying the full boat of 500, [0] is a good explanation of some of the mechanics behind why you might want to do that, and what difficulties it

Speaking of not carrying the full boat of 500, [0] is a good explanation of some of the mechanics behind why you might want to do that, and what difficulties it introduces (warning: auto-playing video). If you choose not to own all 500, that is going to introduce some tracking error. A casual search turned up [1], which, although old, has some interesting numbers on the tracking error, expense ratio, and alpha [2] of several funds. I found it interesting that some funds actually generated a small amount of alpha. I bet over time the mean alpha for a sampled-index strategy is 0 though, just by the law of large numbers. --- [0]: https://www.etf.com/etf-education-center/etf-basics/understanding-tracking-difference-and-tracking-error?nopaging=1 https://www.etf.com/etf-education-center/etf-basics/understa... [1]: https://seekingalpha.com/article/217707-keeping-track-of-the-s-and-p-500-index-trackers https://seekingalpha.com/article/217707-keeping-track-of-the... [2]: Alpha, intuitively speaking, is basically the amount of excess return over and above what you'd get if you theoretically just owned the whole index with 0 transaction fees. Pretty much, it encapsulates "how much did this strategy beat the market by." Predictably, alpha values for these funds are small and close to zero. Most are negative, meaning you're going to lag the market. Unless you have enough money to use a direct indexing strategy, you basically have to live with that.