Fund overlap is when two or more mutual funds in your portfolio hold significant positions in the same stocks. High overlap means you’re not as diversified as you might think—if those stocks fall, multiple funds suffer together.

Why It Matters for FIRE

FIRE investors often hold multiple funds (e.g. Nifty 50 index, Nifty Next 50, a flexi-cap). If these funds have 60–80% overlap in holdings, you’re effectively concentrating risk. A single index fund like Nifty 50 can be sufficient for core equity exposure; adding overlapping funds may not improve diversification.

How to Check

Many tools and fund fact sheets show overlap percentages. If you hold two large-cap funds, overlap can be 70%+. For a simple FIRE portfolio, one broad index fund plus PPF or debt funds often provides adequate diversification without overlap concerns.