My article on Best Equity Funds is one of the most popular articles on Relakhs.com. I have been receiving lot of queries on how to compare and select the best Equity oriented mutual funds. I have noticed that many investors prefer to invest in lot of funds to achieve diversification. Too many funds, especially from the same Fund category may lead to unnecessary ‘Portfolio Overlap’.
Two seemingly different mutual fund schemes can own the same set of stocks. In such a scenario there is no real purpose of holding two funds. Portfolio overlap leads to redundancy.
In this post let us understand – What is mutual fund portfolio? How to check the portfolio of stocks owned by your mutual fund? What is Mutual Fund Portfolio Overlap? How to compare and check mutual funds portfolio overlap? How to know common stocks owned by two or more funds? Which are the best and free online mutual fund portfolio overlap comparison tools?
What is Mutual Fund Portfolio?
A mutual fund is an entity that pools the money of many investors (unit-holders) to invest in different Financial Securities. These investments may be in shares, debt securities, money market securities or a combination of these, as per the fund’s investment objective.
Equity or Balanced (Hybrid) funds primarily invest in shares of companies. Whereas, Debt mutual funds invest in Fixed income securities.
How to check the Portfolio of Stocks owned by a Mutual Fund Scheme?
You can find the portfolio details of a mutual fund scheme on respective Fund House website (or) on online portals like moneycontrol.com or valueresearchonline.com.
For example – If you want to find out the portfolio of stocks owned by HDFC Top 200, follow the below steps;
- Visit moneycontrol.com website.
- Key in ‘HDFC Top 200’ (or your fund scheme name) in the SEARCH bar which is available at the top of the page.
- Click on ‘Holdings’ under ‘Portfolio’ option (available at the left side of the page) to know about the list of stocks owned by this fund.
What is Mutual Fund Portfolio Overlap?
Mutual Fund Overlap occurs when you own two or more mutual funds that may have similar investment objectives and therefore hold many of the same securities.
Let’s say you would like to invest in Fund ABC and also in Fund XYZ. After checking their portfolio holdings, you find that Fund ABC owns three companies’ stocks i.e., Infosys, TCS & SBI and Fund XYZ has invested in Infosys, TCS & Reliance.
Here, you could clearly see that there is too much of a portfolio overlap. Both the funds have invested in Infosys and TCS shares. These are the common stocks owned by both the funds.
As an investor, you don’t want too much of an intersection between the circles- you want the least amount of overlap possible.
Free Mutual Fund Portfolio Overlap Comparison Tools
You may use the below Mutual Fund Portfolio comparison tools to analyze the extent of portfolio overlap among the holdings of your mutual funds.
- Equity Mutual Fund Portfolio – Overlap Checker – This tool (MS Excel based) has been developed by Prof. Pattabiraman of freefincal.com. As of now, the Beta version of this tool is available. This Equity MF Portfolio comparison tool fetches the data from moneycontrol.com. At a time, you can compare the portfolios of three mutual fund schemes. Click here to download the Overlap Checker tool.
- Mutual Fund Portfolio – Overlap Analysis Tool – This is another very popular excel-sheet based tool developed by Prof. Pattabiraman. This tool extracts data from Valueresearchonline.com.
- Online Portfolio Overlap Tool – This online tool is available on thefundoo.com website. You can compare the portfolio holdings of two mutual fund schemes online. Click here to use this online tool.
Why & How to avoid Mutual Fund Overlap?
You may not achieve true ‘Diversification’ just by investing in too many mutual fund plans. You may be surprised to learn that many of your mutual funds overlap. There can be a real danger in mutual fund overlap, and you may not be as diversified as you think.
Having your mutual funds overlap with one another is not the end of the world. When you are comparing the portfolios of two mutual fund schemes, there will definitely be some overlap.. The real issue is the extreme case where you own several mutual funds in the same fund category, investing in the exact same stocks. You run the risk of not being properly diversified in your investing portfolio.
Better diversification can lead to ‘downside protection’ and ‘controlled volatility’. Diversification ensures that if one sector had poor performance, or one stock within a sector struggled, your entire investment kitty doesn’t go down the drain.
It is advisable to understand the type of investing objective of each mutual fund that you own (or planning to invest) and consider spreading out amongst large cap, mid cap, and small cap mutual funds. Also, it is better to avoid the owning too many funds managed by the same fund manager.
You may use the above tools when choosing a mutual fund to avoid portfolio overlap.
Continue reading :
- My Mutual Fund Portfolio
- Why your Best Mutual Fund Schemes may not remain as ‘the best’? | New Classification of MFs
- What is Portfolio Tracking and Why Should I do it?
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Visit freefincal.com for more excel-based free Personal Finance Calculators)
Join our channels
HI nice insights for a freshy investor (37 yrs age) like me….multiple funds overlapping with funds as input & overlap % , no. of common stocks as output is the need of the hour as I couldnt find one for real name of diversification…If you could find any tool like that it would be helpful for better rebalancing…..thanks
Hi Sreekanth,
After analyse my MF Portfolio, i found that i am investing in few MF’s which are overlapped.
HDFC Top 100 Fund
ICICI Prudential Bluechip Fund – Direct Plan
SBI Blue Chip Fund Dir Plan-G
Birla Sun Life Frontline Equity Fund
Now, i have decided to discontinue SIP from few MF’s .
Can you suggest from above list, which fund i need to get exit?
Dear Swati,
All the above four funds primarily invest in giant and large-cap company stocks. Hence, the overlap among these would be very high.
It is really not beneficial in multiple funds which are from same type or category.
You may just retain HDFC Top 100.
May I know your investment objective and time-frame??
My investment objective is to create handsome corpus for 2 kids education and time frame is around 5-7 years.
Right now,me and my spouse are doing SIP in below funds :-
Mirae Asset Emerging
Kotak Multicap
HDFC Mid Cap Opportunities
ICICI Prudential Long Term Equity Fund (Tax Saving)
MF’s To Discontinue due to poor return :-
HDFC Top 100 Fund
ICICI Prudential Bluechip Fund
SBI Blue Chip Fund Dir Plan-G
Birla Sun Life Frontline Equity Fund
Please suggest
Dear Swati,
Since how long have you been investing in the below funds?
HDFC Top 100 Fund
ICICI Prudential Bluechip Fund
SBI Blue Chip Fund Dir Plan-G
Birla Sun Life Frontline Equity Fund
Are you happy with the first set of MF schemes’ performance?
Kindly read :
* Multi-cap Mutual Funds Asset Allocation (NEW) Rules | SEBI’s New Norms
* Calculate how much you need to invest for your Kid’s Education
Happy with below MF’s :-
Mirae Asset Emerging
Kotak Multicap
ICICI Prudential Long Term Equity Fund (Tax Saving) – Just fine
HDFC Mid Cap Opportunities is just 1 year old so would like to give some time to grow.
HDFC Top 100 Fund – Start in May’19
ICICI Prudential Bluechip Fund – Start in May’19
SBI Blue Chip Fund Dir Plan – Start in Jan’17
Birla Sun Life Frontline Equity Fund-Start in Jan’17
Dear Swati,
As mentioned, the below funds are all large cap oriented ones.
HDFC Top 100 Fund – Start in May’19
ICICI Prudential Bluechip Fund – Start in May’19
SBI Blue Chip Fund Dir Plan – Start in Jan’17
Birla Sun Life Frontline Equity Fund-Start in Jan’17
You can retain one (may be HDFC fund) and divert the funds to other existing MF Schemes.
If your investment time-frame is around 5 years, can reduce allocation to mid-cap and invest more in large cap fund and can also equity hybrid fund.
I don’t have any idea on equity hybrid fund.
Can u suggest some?
Also, my husband has suggested below international MF’s to diversify investments:
Motilal Nasdaq 100 ETF
Franklin Feeder
Icici us opportunities fund
What’s ur opinion on these?
Dear Swati,
Ex : HDFC Hybrid Equity fund or ICICI Equity and Debt fund
You can allocate a portion of your funds to international ETF Fund (ex: Motilal)
Thx Sreekanth !!
looks like you are chasing returns –
Good day Sree
I had prudently picked funds based on overlap etc but from the past 9 months, the below funds of mine have been tanking and making severe losses (going negative). Am doing SIP on them, with the negative appreciation, is it still advisable to continue investing? or should I stop for some time, kindly suggest…
ABSL Equity Fund – Growth-Direct
L&T Emerging Businesses Fund Direct Growth
SBI Blue Chip Fund Dir Plan-Growth
Franklin India Smaller Companies Fund – Direct
Mirae Asset Emerging Bluechip Fund – Direct – Growth
Dear vivek,
The listed funds are decent choices.
May I know your investment objective(s) and time-horizon..
Hi Sree…
Objective is to have good returns from 3-4 yrs onwards… like atleast 12% PA….
Should i stick on with investing in these thru SIP still?
thanks
Vivek
Dear vivek,
Do you need to withdraw these investments 3 years from now?
Not really. I will stick with them for years but i would want to see returns and may want to encash the returns from year 3 onwards Sree. I’m done with year 1 of investing btw..
Dear Vivek,
You may reduce your exposure to Small cap funds (Franklin & L&T) and divert the allocation to an Hybrid fund instead.
Brilliant !! I didn’t know people have created overlap-finder. So useful!! Bless you all for sharing freely your knowledge and expertise.
Thank you for this lovely article, Sreekanth!
Btw I’d like to share with you that there are times when I’ve deliberately chosen funds from two different AMC’s around the same theme. This is my “research” – real data which I can use to come to my own conclusions for e.g. expense ratios and effect on returns, turnover and effect on returns.
I’m a beginner and I find the tons of numbers available on the internet overwhelming and sometimes contradictory too. Hence my very own research 😉 🙂 Plus I’ve lots of time. 🙂
Dear Roshni ..Yes, all of us are overloaded with plenty of info..how we are going to use and comprehend it is what matters!
Thanks for sharing your thoughts!
Hi Sreekanth, thanks for articles on all these tools …I was not even aware of these! May I ask how much of portfolio overlap is an accepted norm. I compared few large cap funds and they all seem to have atleast 40% overlap and few as high as 58% overlap .So i was confused.
regards
Dear Yavika,
Though overlap is a good analytical tool, its not the deciding factor when shortlisting a fund.
There is no rule of thumb, but let’s say if overlap is as high as 60%, there is no point in adding multiple funds to ones portfolio.
Also, note that the funds’ portfolios change over a period of time, but we cant keep churning our MF portfolio based on Overlap indicator.
We can pick 2 to 4 good funds based on financial goals and just keep track of them.
Hi Sreekanth,
Its very nice blog. Very Informative. I need to invest in tax saving fund plus long term inverstement atleat for 10 years. For starting I filter following MF based on varius articale. Let me know which MF I need to choose. I am planning to invest 1 lakh rs per year.
MF which I filterd.
DSP BlackRock Tax Saver Fund – Below Avg Risk
Mirae Asset tax Saver Fund –
Above two has around 40 % overlap portfolia.
Axis Long Term Equity Fund – Low Risk
Reliance Tax Sever Fund – High Risk
Franklin India Taxshield Fund – Low Risk
Dear Raj,
Are you planning to pick multiple ELSS tax saving funds only?
For now, my main objective is to invest in ELSS as I have to put 1lakh to fill my 80c bucket. Is it good to invest in multiple ELSS or in one.
Dear Raj,
Read: Why one needs to THINK beyond taxes!
Tax saving is an added advantage of a fin product. Suggest you to identify your financial goals and map fin products as per your requirements.
You may consider : Franklin Tax shield & Birla Tax plan.
Read : Best equity funds.
Hello Sir,
Actually am doing an analysis on American Depositary Receipts(ADR). We do have several funds holding these ADR’s.
Apart from portfolio overlap, can i perform some other analysis like country overlap, sector overlap. Would that be useful for investors and whether the funds have the same objectives and how to do that.
What other research can be done apart from the above to help investors in their investment?
Thanks
Kaviraj
Dear kaviraj ..I am not very well versed on ADRs.
Hi,
I am new to investments and I would like to invest on Mutual Funds. My objective is to do tax saving along with some good returns and tenure is for 3 years.
Could you please suggest me on which firm I can invest, 1 or more ?
Thanks,
NAs
Dear Nasrulain,
ELSS funds can be considered, but suggestion is to remain invested for atleast 5 years or so.
Ex – Franklin tax shield or Axis LTE.
Read : Best ELSS funds.
Hi Sreekanth,
I’m planning to invest 3000/- in Axis Long Term Equity Fund and another 3000/- in Franklin India Taxshield in order to save income tax . Let me know if I have chosen the right funds to invest ?? Any other options if you can suggest ??
Thanks,
Srikanth
Dear srikanth..Kindly go ahead…Read: Best ELSS funds.
Hi Sreekanth-
AXIS and FRANKLIN has an overlap of 21% and this includes one of the top holdings (HDFC) for both (8 %)..
Will it be a good idea to have them together at the same time ? Even I was thinking to invest in both.
Advice please.
Dear Priyadarshi ..May I know the MF scheme names?
Hi Sreekanth.
AXIS long term equity G and Franklin India taxshield..
Dear Priyadarshi,
If your main objective is long-term and some tax savings, you may invest in both of them.
But if one of your objectives is not to save tax, its better to invest in regular diversified equity fund.
Hi,
Can you share some information about the fund Religare Invesco Dynamic Equity Fund – Direct Plan? I saw ET that it is one of the good fund. Will you recommend to invest in this fund?
Dear Sankar,
It is a typical Large Cap Fund. There can be plenty of good and consistent performers. If you are convinced with its past performance, kindly invest in it.
Looks like it has LOW risk grade and ABOVE AVERAGE return grade.
May I know your investment horizon?
Read: Best Equity funds 2016.
Wow, what a blog ya?? soooo much information. Great service!!!
I saw the online tool to identify the MF overlap. Till what percentage of portfolio overlapping we can consider it is ok to invest. Please advise.
Regards
Sankar
Dear Sankar,
There is no thumb rule as to what % of overlap is acceptable. If say overlap is as high as 75%, its better to drop one fund out of the two.
He is really genius.
hows to learn investment plan. Also, I’m looking for investment. my monthly salary is 45000 and having a loan of 18000 per month. I can invest 10k per month. kindly let me know that best option for 10 year to 15 year plan
Dear Vishvajeet,
kindly read:
Best Equity mutual funds.
List of Best Investment options.
Hi Sreekanth . I am planning to invest money in mutual funds to save tax and get some benefit out of it .I am ready to take risk but not very high risk . I am looking to invest the around 1 lakhs per year overall (divided among different funds) for a period of 10-15 years . Can you please suggest on how to proceed with it ? I also have one more question . Does investing in mutual funds helps me in tax savings ? FYI . I am very new to it and any suggestion will be appreciated .
Please suggest me two ELSS funds to invest 4tax saving.Also suggest these two funds r gud for investment-Birla SL MNC nd Sundaram Select Midcap. (Already sip is going) .Thanx nd Regards
Dear Raj,
Kindly read: Best ELSS funds 2016.
I believe that there are better funds than the two mentioned here. If you have active SIPs, you may continue with Birla fund.
Read: Best Equity mutual funds.
Hi Srikanth
I would like to invest a lump sum amount of 2.5 lakh INR. my investment horizon is 10 years. Following the initial lump sum i would like to do SIP of INR one lakh rupees/month again for a horizon of 10 years. May i please kindly request you to suggest appropriate mutual funds for my above mentioned plans.
Dear kishore,
You may pick one equity diversified fund + One mid/small cap fund + a small portion in a balanced fund.
Ex- Franklin prima plus + HDFC midcap opp fund + TATA balnced fund.
Vasu narayana 24age
May per month 5000ruppes ppf may 3000 and mutual funds may 2000 investment karna chatam 20years thak plz suggested me good mutual funds
Dear Vasu,
Kindly read:
Best Equity mutual funds 2016.
Best balanced funds.
Excellant article. I have started doing SIP from 4 months.
1. MIRAE ASSET INDIA OPPORTUNITIES FUND –
2.SBI Magnum MidCap Fund
3.ICICI Prudential Focused Bluechip Equity Fund – G
4.Franklin India Balanced Fund-G
I am investing 5000/- in each monthly. want to invest for 15 yrs. What do you think. Should i change any fund.pls have a look and suggest.
Dear Nakul,
You can continue with your investments.
Kindly read :
MF portfolio overlap analysis tools.
Best equity funds for 2016.