How Much Overlap Is Too Much?
For two active equity funds, overlap below 40% is generally healthy, 40-50% is moderate, and above 50% is high. Above 60% often means the second fund adds limited diversification.
Key Takeaways
- •Use 50% as a practical warning threshold for fund pairs.
- •Index funds naturally overlap with active funds in the same category.
- •Review top overlapping stocks, not only the headline percentage.
FAQ
Does overlap matter for debt funds?
Less than equity funds, but issuer and duration overlap can still matter.