Fund Overlap

Definition of overlap Fund’

The overlap of the Fund is the situation when an investor invests in multiple mutual Funds with overlapping positions. The slab Foundation can be caused by owning several mutual funds or exchange traded funds (etfs). Fund overlap reduces the benefits of diversification for the investor.

Breaking down the match Fund’

When small amounts of overlap can be expected, extreme cases of overlap, the Fund may provide the investor with unexpectedly high levels of risk or sectors, which can distort portfolio returns compared with the appropriate benchmark.

It can be very difficult for retail investors to track individual Fund company, but a quarterly or annual check can help investors to understand the strategy of each individual Fund and will provide an opportunity to compare a company from one Fund to another.

For example, if two separate mutual funds both overestimated the same stock, it may be worthwhile to replace one of the funds with a similar Fund that does not carry stocks in the TOP holding. If a specific sector of the advantage in two of the Fund (such as the overweight position in technology relative to the s&P 500), the investor must weigh the benefits and risks of such attention.

The Sectors Are Overweight

Being overweight is a situation when the investment portfolio contains an excessive number of securities compared to the weight of the security in the reference portfolio. Actively managed portfolios is the preponderance of security when it allows the portfolio to achieve excess returns. Being overweight can also treat the opinion of the investment analyst that the security will outperform its industry, sector or the whole market.

Securities, generally, will be overweight when a portfolio Manager believes that the security will outperform other securities in the portfolio. Example of safety excess weight in the investment portfolio when the portfolio usually has safety in weight 15%, but the weight of securities is increased to 25% in an attempt to increase the yield of the portfolio. Another reason for the purchase of securities in the portfolio for hedging or risk reduction from other weight.

Alternative recommendations, with the weight equal weight underweight equal weight implies that the security should perform in accordance with the index, while underweight indicates that the security is expected to lag the index in question.

The overlap of the Fund and diversification

Fund managers and investors often diversifitsirovat their investments across asset classes and to determine what proportion of a portfolio to allocate to each. They can include stocks and bonds, real estate, exchange traded funds, commodities, short-term investments and other classes. Then they are able to diversify among investment asset classes, for example, by selecting stocks from different sectors that typically have low profitability correlation, or choosing stocks with different market capitalization. In the case of the issuance of bonds, investors can choose from investment grade corporate bonds, U.S. Treasury bonds, state and municipal bonds, high yield bonds and others.

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