Ritesh Sabharwal CFP®

W.M.W #10: Rohit's 56.08% portfolio overlap mistake is costing him

Reading time: 3 minutes - August 23, 2025

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Hey Reader

A friend of mine (Rohit) last weekend showed me his “carefully chosen” mutual fund portfolio. He had 5 different funds, spread across big names, different AMCs, and even different categories. It looked neat on paper.

But when we checked the numbers, he was a little surprised. Two of his funds had more than 55% overlap. In simple words - more than half his portfolio was invested in the same stocks.

This is a blind spot many investors - especially busy professionals like you - carry for years without realizing it. You think you’ve spread the risk, but really, you’re doubling down on the same companies.

And that’s why today, let’s talk about:

• What fund overlap actually means
• Why too much overlap quietly kills diversification
• How to check it for your own portfolio in 2 minutes

Because trust me, you don’t want to discover this after a market downturn.

3 Things To Understand About Fund Overlap (And How To Avoid It)

If you want your money to work smarter - not just harder - you’ll need to track a few things.

#1 – What is Fund Overlap?

Fund overlap simply means the percentage of common stocks between two mutual funds.

Say both your funds are holding Reliance, HDFC Bank, and Infosys in large quantities. Even if you own different funds from different AMCs, at the end of the day you’re betting on the same businesses.

👉 In the example we checked (image below), two funds had a 56.1% overlap. That means more than half the portfolio was running in circles. That’s not diversification - that’s duplication.

#2 – Why Too Much Overlap Hurts You

Now, you might say - “But these are good companies, right?”

Sure, they are. But the whole point of diversification is to spread risk across different sectors, themes, and styles. If one sector crashes (say banking or IT), you don’t want your entire portfolio taking the same hit.

Too much overlap means:

• You’re exposed to the same risks repeatedly
• You’re not actually benefiting from having multiple funds
• Your portfolio might look bigger but isn’t necessarily better

#3 – How To Check Fund Overlap (takes just 2 minutes)

Here’s how you can do this using AdvisorKhoj.com​

1. Click on MF Research in the top menu and Select Mutual Fund Portfolio Overlap

2. Pick the category of fund you want to compare

a. Enter Fund 1 name e.g., 'Axis Large Cap Fund'

b. Enter Fund 2 name e.g., 'HDFC Large Cap Fund'

c. Click on Submit

You’ll see the percentage overlap between the two funds. In Rohit's case, 'Axis Large Cap Fund' and 'HDFC Large Cap Fund' had 56.08% overlap.

If it’s high (say 40% or more), you need to pause and think - are you really diversifying, or are you stuck with the same portfolio?

Now you can do this for any category, let's take an example in the Flexi Cap space:

Parag Parikh Flexi Cap and HDFC Flexi Cap has 32.39% portfolio overlap.

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P.S - No recommendation of either funds or Advisorkhoj, no affiliation. Only for educational purposes.

Here’s what you learned today:

• Fund overlap is when two funds hold the same stocks in their portfolio
• Too much overlap = less diversification, more hidden risk
• How to check your own funds overlap in 2 minutes using a free online tool

Your action step today: Take 2 minutes. Check at least two of your largest mutual funds for overlap. You might be surprised at what you find. Remember - owning 5 funds doesn’t automatically make you diversified.

Of course sometimes based on the market cap categorization, funds will be forced to invest in some similar companies, but if your overlap is too much then your'e really investing in the same things!

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