Definition of Portfolio Overlap
Portfolio overlap refers to the degree to which two or more mutual funds in your portfolio hold the same underlying stocks. High overlap means you are effectively investing in the same companies multiple times, reducing the actual diversification benefit of holding multiple funds.
For example, many large-cap Indian funds hold very similar top-10 stocks (Reliance, HDFC Bank, Infosys, TCS). If you own 3 large-cap funds, your overall portfolio may be 60–70% the same stocks — giving you the illusion of diversification without the reality.
The consequence: if those shared stocks fall, all your funds fall together. Use InvestKit's Portfolio Overlap Tool to analyze how much your funds overlap and build a truly diversified portfolio by combining funds from different categories (large cap + mid cap + international) or switching to a single well-managed Flexi Cap or Multi Asset fund.