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;
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.
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.
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This post was last modified on July 10, 2023 9:10 pm
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View Comments
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
He is really genius.
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.
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.
Dear Sree,
I am going through overlap calculator at thefundoo.com. Can you suggest what percentage of overlap can be considered good?
Thanks
Sree,
Also please explain how to interpret the diagrams in the website thefundoo.com
Dear Udayakumar,
There is no hard n fast rule for the % of overlap..Say if the overlap is 60% then it is better to drop one fund from the portfolio and pick another one (may be from a different fund category).
For example : If Fund A has 40 stocks in its portfolio & Fund B has 54 stocks, with 14 stocks as 'common stocks' then
you can read it as ; 14 common stocks, 26 (40-14) stocks as uncommon stocks in Fund A , 40 (54-14) stocks as uncommon stocks in fund B. You can also view % weightage of these common stocks in respective fund portfolios.
Neatly explained:) Thanks
Hello Mr Sreekanth reddy
Kindly suggest me some MF by which I can avail tax saving as well as future goal...
My future goals are
1. 40 lacks for daughter marriage after 25 year
2. 25 lacks for Child education after 16 year
Also please tell between SIP or lumsum investment in MF, which one is good?!?
Dear Aasu,
SIP or lump sum is based on your available resources and future goals. Both modes are equally good if your investment horizon is longer.
Kindly read:
Best ELSS funds for 2016.
Best Equity funds.
Kid's Education goal.
hi sreekanth
i recently started to read your articles.
i m 35 yrs interested in corpus building and i recently joined your world of MFs thru' SIPs.
SBI magnum global fund-reg-2000/, Reliance tax saver- growth plan-3000/, Axis long term equity fund-6000/ and DSP tax saver fund -reg-g-3000/ plus i have started with ppf 150000/ plus i have two lic policies amounting 48000 (jeevan saral and jeevan jyoti)
i plan to build a corpus of 1c in 15 years and can invest 50000 pm.kindly suggest.
Dear VIDHI,
Its our world of MFs :) Everyone's..
Why are you investing in 3 ELSS funds? It is better to reduce your contribution towards your PPF and invest more in equity mutual funds for long-term.
Consider surrendering or making LIC policies as PAID-up.
Read;
How to get rid off unwanted life insurance?
Term plan Vs traditional plan.
Best term insurance plans.
Hi sreekanth,
really appreciate ur efforts and patience to reply to one and all. will go with few more. i would like to know how can i invest directly. should i have a demat account or wht other options do i have. i m really blank in this regard. (SIP was done by bank ppl)
i want to invest 45000 p m and i have chosen the following three from ur well researched list:
1) TATA balanced fund- 45000 quarterly
2) HDFC capital builder- 45000 quaterly
3)UTI mid cap-45000 quarterly
i hope this is the path to my goal
regards
dr vidhi
Dear vidhi,
To know more about how to invest in Direct plans..kindly read my article on 'Direct plans of mutual funds'.
Shortlisted funds are good ones. May I know your investment horizon?