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.
Continue reading :
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Visit freefincal.com for more excel-based free Personal Finance Calculators)
This post was last modified on July 10, 2023 9:10 pm
Filing your Income Tax Return (ITR) is not just about meeting deadlines—it’s about choosing the…
Retirement planning in India is often misunderstood. Many people think any long-term savings or investment…
You’ve probably seen the same property quoted at different prices. One person says ₹60 lakh,…
Buying insurance is easy. Getting your claim settled—that’s where the real test begins. For any…
Gifting immovable property—like land, plots, or houses—is super common in India. Families often do it…
Most people believe that investing alone is enough to create wealth. But in reality, many…
This website uses cookies.
View Comments
I have always enjoyed reading your articles. However, when commenting, it is better to put up a contrarian view, rather just agreeing. This will benefit all of us. I am putting up some comments. I am no financial expert and so, some of it may sound foolish. Anyway, here are the points I would like to raise:
1. Two mutual funds with even exactly the same stocks, may buy and sell them at different times and this will obviously result in different returns
2. If you are a conservative investor and want to stick to large-cap funds only, you will find that there is some overlap, whatever fund you choose in that category
3. You have mentioned that it is better to leave your fund with different fund managers rather than a lump sum with one fund manager - so again, even if the stocks are same in two different funds, the fund managers would be different and that should spread your risk
What do you feel?
Dear Biju,
I do share contrary views if it is required. But, will surely keep this in my mind and thank you for highlighting this point.
1 - Yes. So, it is better to invest in say one Large cap fund rather than investing in two Large-cap oriented funds.
2 - Being conservative or aggressive, depends on one's Financial Goals. If an individual is planning for long-term goals, he/she can't be conservative.
3 - I did not get your point.
Hello
I am a new but an ardent fan of your blog. and just recently I have actually started looking at my portfolio in more details. In fact I was just looking at two funds I have invested in (HDFC top 200 and HDFC equity) and was getting concerned that they seem so identical, and true enough they have 80% overlap. I have also invested i HDFC Prudence. Should I move my assets from top 200 to equity and prudence and mid cap opp instead?
I was also wondering, that since balanced funds have a high expense ratio, does it make sense to invest in equity MFs separately and a debt fund instead of a balanced fund?
Dear Varsha,
Kindly let me know about your financial goal(s) and investment time-frame??
To be honest, at present my goals are saving for retirement, having a corpus for any emergency and my child's education. Child's education shall Begin after a year. Rest all long term plans only
Dear Varsha,
Kindly go through the below articles and revert to me;
Retirement planning in 3 easy steps
Kid's education planning
Best Term insurance plans
Best Equity funds.
Very Nice article. Please keep going.
Thank you dear Krishnamurthy..Do share the article with your friends :)
HI Shreekanth
1.Excellent article on a very relevant topic.
2.How much of overlap is acceptable in the funds??
3.It is unlikely that any two funds will have no overlap.
Regards
Dear SHRIKANT,
There is no hard and fast rule. Say, if overlap is 80% then obviously it is a matter of concern.
Personally I am ok with 20% to 40% overlap. Do note that the portfolios of MF schemes can change over a period of time.
Please post a calculated real returns of any top performing MF ,after taking in all the charges like entry load ,depository fee etc.
Dear Mohan..Kindly read my articles on;
Top Equity funds
Top Balanced funds
Top MIP funds.
Very well said and explained. Thanks for the valuable info.
Thanks
Sunil
Keep visiting dear Sunil :)
Excellent Article. Now i realize i need to rejig my portfolio again. Thanks for posting.
Dear Sathish,
Thank you for your kind words. Keep visiting :)