Mutual Fund Overlap Tool Free 2024, Multiple, Checking Now

Mutual Fund Overlap – The mutual fund portfolio overlap tool allows you to evaluate and determine the level of overlap between the portfolios of two or three equity funds. There are no category constraints here, and you can compare overlaps between active and passive funds. You can compare the mutual fund overlap of two or three funds.

The mutual fund overlap is calculated using the most recent monthly fund portfolios. Please keep in mind that this tool only applies to pure equity funds, as overlaps are an essential issue for these funds alone.

Here’s how to read the output:

  • The graph on the left shows you the overall overlap by portfolio weight between each pair of funds and the overlap for all 3 funds. This is calculated by taking the common weights of each stock across the fund portfolios.
  • The table on the right gives the list of stocks common between each pair of funds and the common stocks for all 3 funds. It additionally lists the weight of these stocks in each fund’s portfolio.
  • The metrics below the mutual fund overlap data cover basic details and key performance metrics that enable a more detailed comparison of the funds.
  • If you’re looking at funds across categories, bear this difference in mind when comparing performance and overlap metrics.

What is mutual fund portfolio overlap?

Mutual fund portfolio overlap refers to the number of common stocks shared by two funds or the degree to which two fund portfolios are similar. Essentially, it entails comparing the underlying portfolios of the funds you want to compare, finding the securities that are shared by the two, and then calculating the amount of overlap. Mutual fund portfolio overlap is most common:

Because the investible universe of large-size companies is restricted, funds in the same category – for example, two large-cap funds – can include numerous equities that are common to both their portfolios.

Among funds that fall into groups with overlapping definitions according to SEBI (flexi cap funds, for example, could hold securities that are also held by large-cap funds, mid-size funds, and small-cap funds),

A sector-leading stock may appear in both a sector-specific fund and a large-cap fund; sector funds may also have commonalities in the stocks they invest in because they are restricted to a single sector.

Of course, mutual funds can overlap in a variety of ways other than those listed above. However, keep in mind that the mutual fund overlap ratio is not fixed and is subject to fluctuate based on changes in the funds’ underlying holdings.

When considering adding a fund to your portfolio, mutual fund overlap information can be useful. The overlap data might help you determine whether the fund will boost your exposure to specific firms or industries in your portfolio. This is also useful when pruning your portfolio because it can tell you if you have numerous funds that are essentially doing the same thing for you.

What does mutual fund portfolio overlap tell you?

Some overlap between funds is permissible and unavoidable, particularly when they are in the same category. Only when the degree of overlap is large does overlap become a matter to consider. This is because:

If you invest in funds that have a high degree of overlap, you may unwittingly increase your exposure to certain stocks or sectors. This means that any negative impact on the overlapping equities may be felt more strongly in your portfolio. By over-exposure to certain sectors, you may be exposing your portfolio to the ups and downs of cyclicality that many industries encounter.

Funds that have a high degree of overlap may exhibit similar volatility or returns. As a result, rather than diversifying your portfolio by adding the fund, you may merely be increasing the duplication.

If you invest in funds that have a high degree of similarity, you may limit your portfolio’s capacity to access different market opportunities. Instead, your portfolio may be limiting itself to a limited number of stocks or sectors.

Other factors to consider along with mutual fund portfolio overlap

Overlap between funds, like every other statistic for evaluating funds, cannot be regarded in isolation. The performance of a fund is ultimately what matters. Therefore:

Returns are calculated using a fund’s total portfolio and stock weights. As a result, while there may be more overlap amongst funds, the variation in weights to common stocks as well as unique stocks might affect performance. This is rare in cases where the overlap is 80% or above, but for others, consider other performance indicators before making an investment choice.

Consider indicators that shed additional insight on things like how much risk a fund has taken and how erratic its returns are. The fund’s standard deviation will show you the extent to which the returns have fluctuated. The Sharpe ratio indicates how much risk the fund has taken to obtain the results it has. The extent of the drop indicates how well the fund has managed its downside risk. These metrics are included in the data below the Mutual Fund Overlap Tool result.

Mutual fund overlap is also calculated using monthly portfolios, and it varies when portfolios change. A critical indicator to evaluate is a fund’s consistency, or how well it has outperformed its benchmark and category. Both metrics are included in the tool.

Fund management and AMC track records will also be crucial aspects to examine while evaluating funds.

If you are new to mutual fund investing, read ‘Understanding Mutual Fund Returns,’ which explains out the fundamentals of mutual fund returns. ‘Mutual fund rolling returns – 3 things you must know’ delves deeper into rolling returns and how you can use them to manage your portfolio, of course with the help of our tools – the mutual funds rolling returns calculator and mutual funds rolling returns – category wise, which will help you calculate and compare against category peers. Our Mutual Fund Review Tool and Prime Portfolios’ meticulously prepared ready-to-use portfolios will lighten your load by completing most of the legwork for you.

For more mutual funds and investment-related articles visit Investment Page.

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