Mutual fund overlap: How to reduce portfolio overlap in mutual funds

[anuragmukherjee28]

Mutual fund overlap is when two or more mutual funds invest in the same stocks or other securities. This can happen for a number of reasons, such as:

• The funds have the same investment objective.
• The funds are managed by the same investment company.
• The funds track the same index.

Mutual fund overlap can reduce the overall diversification of an investor's portfolio. This is because the investor is essentially investing in the same stocks or securities multiple times. This can increase the investor's risk exposure and reduce their potential returns.

There are a few things that investors can do to reduce mutual fund overlap in their portfolios:

• Compare the portfolios of different funds. Investors should compare the portfolios of different funds to see how much overlap there is. They can do this by looking at the fund's fact sheet or by using a mutual fund overlap tool.
• Invest in funds with different investment objectives. Investors should try to invest in funds with different investment objectives. This will help to reduce the amount of overlap in their portfolios.
• Invest in funds that track different indexes. Investors can also reduce overlap by investing in funds that track different indexes. This will help to ensure that the investor is investing in a wider range of stocks or securities.