Over the last decade, mutual funds have become one of the most popular investment options in India. SIPs are widely discussed, investment apps are everywhere, and starting an investment today takes only a few minutes.
While this accessibility is a good development for investors, it has also created a new challenge — many people are investing without truly understanding how mutual funds actually work.
One of the most common mistakes I come across while reviewing portfolios is overlapping mutual funds.
When More Funds Create More Problems
Many investors believe that holding a large number of mutual funds automatically means their portfolio is well diversified. Unfortunately, that assumption is often wrong.
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I recently reviewed the portfolio of a friend who proudly told me that he had built a “very diversified” mutual fund portfolio over the years.
When we opened his investment statement, I noticed he had invested in more than 40 mutual fund schemes.
At first glance it looked impressive. Different fund houses, multiple categories, and investments made over several years.
But once we started analysing the portfolio more carefully, the real picture became clear.
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Many of those funds were investing in exactly the same companies.
Stocks like HDFC Bank, Reliance Industries, ICICI Bank, Infosys and TCS were appearing repeatedly across several funds in his portfolio.
In other words, even though he had invested in more than 40 schemes, a large part of his money was indirectly invested in the same group of companies again and again.
This is what we call portfolio overlap.
What Is Mutual Fund Overlap?
Portfolio overlap happens when multiple mutual funds in your portfolio hold many of the same stocks.
This usually happens when investors:
- Pick several funds from the same category (for example, multiple large cap funds)
- Invest based on recent performance
- Follow recommendations from friends or social media
- Add new funds every year without reviewing the existing portfolio
As a result, the investor may feel that the portfolio is diversified across many schemes, while in reality the underlying investments are very similar.
SEBI’s Recent Step to Reduce Portfolio Overlap
The issue of portfolio overlap has become so common that even the regulator has started addressing it.
In February 2026, the Securities and Exchange Board of India (SEBI) instructed Asset Management Companies (AMCs) to review their schemes and reduce excessive portfolio overlap between funds within the same category.
The objective is to ensure that investors receive genuine diversification rather than multiple schemes holding almost identical portfolios.
Over the years, it has been observed that several funds across different AMCs often end up holding many of the same large-cap stocks. While this is partly natural due to market size and liquidity, excessive similarity between schemes can reduce the real benefit of diversification for investors.
SEBI’s direction aims to encourage fund houses to maintain clear differentiation between schemes so that each fund serves a distinct investment purpose.
However, even with such regulatory measures, investors can still unknowingly create overlap within their own portfolios by investing in multiple funds with similar investment styles.
This is why periodic portfolio review and proper fund selection remain important.
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Why This Matters
Too much overlap can create several problems.
First, it reduces the actual diversification of your portfolio. If many of your funds hold the same companies, your investment is more concentrated than you may realise.
Second, managing a large number of schemes becomes unnecessarily complicated. Tracking performance, rebalancing and reviewing 30 or 40 funds is simply not practical.
Third, adding more funds does not necessarily improve returns. In fact, many successful portfolios are built using a limited number of carefully selected funds.
The key is quality and allocation, not quantity.
The Value of Professional Guidance
This is where the role of a mutual fund distributor or advisor becomes important.
A good distributor does not simply recommend funds. The real role is to help investors build a structured portfolio that aligns with their life goals.
At BVB Capital Private Limited, we spend a lot of time understanding our clients before suggesting any investment.
Every investor is different. Age, financial responsibilities, income stability, risk tolerance and long-term goals all matter when designing an investment plan.
For example:
A young professional starting their career should have a very different investment strategy compared to someone approaching retirement.
Similarly, a person investing for a child’s education or a long-term wealth creation plan needs a portfolio structured around those specific goals.
Why Apps Cannot Replace Human Advice
Technology has made investing easier, and investment apps certainly have their place.
However, an app cannot fully understand the financial life of an individual.
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It cannot evaluate emotional behaviour during market volatility, family responsibilities, or long-term financial priorities.
Apps work on algorithms and predefined lists of popular funds.
A human advisor, on the other hand, brings experience, judgment and personal understanding into the process.
Over the years, we have seen that investors often benefit greatly from having someone who can review their portfolio, identify inefficiencies like overlapping funds, and guide them towards a more disciplined investment approach.
Building Wealth Requires Structure
Mutual funds are powerful wealth-creation tools when used correctly.
But investing without a proper structure can lead to confusion, duplication and inefficient portfolios.
In many cases, simplifying a portfolio by selecting the right funds and aligning them with clear financial goals can make a significant difference over the long term.
That is the philosophy we follow at BVB Capital Private Limited — helping investors build simple, disciplined and goal-oriented portfolios rather than accumulating dozens of random schemes.
Because successful investing is not about how many funds you own.
It is about how well your investments are planned.
About BVB Capital Private Limited
BVB Capital Private Limited is an AMFI Registered Mutual Fund Distributor (ARN-348338) focused on helping investors build structured, goal-based mutual fund portfolios.
Through careful portfolio selection, risk assessment and long-term planning, we aim to guide investors toward disciplined wealth creation.
contact our team
📞 WhatsApp: 96339 40008
🌐 www.bvbcap.com
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