What is Portfolio Overlap

Portfolio Overlap is a way to find the common holdings(same stocks) when investing in multiple mutual funds. When Investing in multiple funds, these funds may have the same stock holding. In such a scenario, the portfolio is less diversified and high risk.

Online Tool

Fundoo.com is help to find the portfolio overlap: Common stocks in mutual funds, find portfolio overlap among schemes (thefundoo.com)

Example

A person invests in two different mutual funds. If the mutual funds invest in the same company, then there is an overlap in the portfolio. The investor will lose money if the price of the funds falls as their portfolios are the same

Comparison 1

Scheme A: Axis Nifty 100 Index Fund

Scheme B: SBI Banking & Financial Services Fund

Portfolio Overlap is 25%

Low risk when the market falls

Comparison 2

Scheme A: Axis Nifty 100 Index Fund

Scheme B: UTI Nifty Index Fund

Portfolio Overlap is 87%

High risk when the market falls

PayTM Money

Portfolio Overlap feature is available in PayTM Money. It would be able to identify if a fund has a similar allocation like existing portfolio.

Conclusion

Portfolio Overlap is also use to reduce the loss of principal investment when mutual fund performs negative.

The Phylife [CPS] IN
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