Fund Overlap

Fund overlap refers to the degree to which two or more mutual funds in an investor's portfolio hold the same underlying stocks or securities. High fund overlap means the investor effectively has concentrated exposure to a smaller set of companies than they may realise — reducing the true diversification benefit of holding multiple funds. For example, two large-cap funds in an investor's portfolio may both hold HDFC Bank, Reliance Industries, and Infosys as top positions, creating significant overlap despite appearing to be separate funds. Fund overlap is measured as the percentage of common holdings by weight between two funds. Tools for calculating overlap are available on Indian fintech platforms. To maximise diversification, investors should combine funds from different categories — such as a large-cap fund, a mid-cap fund, and a sectoral or international fund — to minimise stock-level overlap and ensure genuinely differentiated exposure.