Portfolio Overlap
The proportion of holdings, by weight, that two funds have in common.
Formula
Overlap % = Sum over all common holdings of the minimum of the two funds' weights in that holding
Unit
%
In depth
Overlap is why holding eight equity funds is usually not eight times the diversification of holding one: Indian large-cap funds draw from the same hundred companies under the same regulatory constraints, so two of them commonly share 60% or more of their portfolios by weight. The investor pays two expense ratios for one exposure and gains little. Overlap is highest within a category and falls sharply across capitalisation segments and geographies, which is where genuine diversification comes from. Checking overlap before adding a fund is a two-minute exercise that prevents the most common portfolio construction error in India.
Worked example
Two flexi-cap funds overlap 62% by weight. ₹5,00,000 in each gives ₹6,20,000 of duplicated exposure across the two, at two full expense ratios, for a portfolio no more diversified than one of them.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Portfolio Overlap” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.