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Explained: What is mutual fund overlap and why it could be a concern for investors


Published on 2024-12-28 17:21:06 - MSN
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  • Mutual fund overlap happens when funds in a portfolio share similar securities, reducing diversification and increasing risk. Investors should check fund holdings, use online tools, review sector allocation,

The article from MSN Money discusses the concept of mutual fund overlap, which occurs when an investor holds multiple mutual funds that invest in the same stocks or securities, leading to a lack of diversification in their portfolio. This overlap can be a concern because it increases risk by concentrating investments in similar assets, potentially magnifying losses if those assets underperform. The piece explains that investors might inadvertently end up with overlapping funds due to similar investment strategies among fund managers or by investing in funds from the same category. To mitigate this, the article suggests using tools like portfolio analyzers to identify overlaps, focusing on funds with different investment styles or sectors, and regularly reviewing and rebalancing the portfolio to ensure true diversification. It also highlights the importance of understanding the underlying assets of each fund to make informed investment decisions.

Read the Full MSN Article at:
[ https://www.msn.com/en-in/money/general/explained-what-is-mutual-fund-overlap-and-why-it-could-be-a-concern-for-investors/ar-AA1wBlPK ]