Is ETF Overlap Hurting Your Portfolio? How To Check

Picture by Getty Photographs; Illustration by Bankrate

Alternate-traded funds, or ETFs, have turn out to be one of the vital in style funding merchandise in latest a long time. They’ll present entry to a diversified portfolio at low prices by a single funding fund. You may as well diversify throughout asset lessons by holding only a handful of low-cost ETFs.

However sure firms have turn out to be so extensively held within the funding world that you might have extra publicity to some shares than you understand. Right here’s an summary of ETF overlap, why it issues and decide in case your portfolio is simply too concentrated in sure shares.

What is ETF overlap and why ought to you care?

ETF overlap happens while you maintain a number of ETFs which might be invested in the identical underlying securities. This issues as a result of most individuals spend money on totally different ETFs to spice up their portfolio’s diversification, however when these funds maintain the identical securities, the diversification advantages are lowered. 

For instance, say you maintain an ETF that tracks the S&P 500 and one other ETF that tracks the Nasdaq 100. You might be stunned to see that you’ve got plenty of publicity to the most important tech firms on the earth, akin to Nvidia (NVDA), Microsoft (MSFT) and Apple (AAPL). You might wish to discover a totally different ETF that provides larger diversification advantages to your portfolio. 

It’s price noting that this situation can come up from holding totally different mutual funds in addition to ETFs. The idea of overlapping holdings may additionally be referred to as fund overlap or asset overlap.

How to test if your portfolio is too concentrated

There isn’t a agency rule about when your portfolio turns into too concentrated. Some traders might really feel snug with increased focus ranges, whereas others might desire to be as diversified as doable. The purpose of understanding ETF overlap is to make you conscious of your portfolio’s publicity. 

Nevertheless, should you see {that a} explicit safety is held throughout a number of ETFs in your portfolio, it’s best to take into consideration how a lot of your portfolio is invested in a single inventory. You might be stunned to seek out that one or two firms account for five p.c or extra of your complete portfolio. If that is so, you would possibly think about diversifying into funds with much less overlap to cut back your publicity to a single inventory. 

Let’s check out the highest holdings of two in style ETFs to see how they overlap. The SPDR S&P 500 ETF Belief (SPY) and the Invesco QQQ ETF (QQQ) are sometimes used to offer development in traders’ portfolios. Right here’s how their high 10 holdings evaluate as of August 2025. 

You’ll be able to see that there’s plenty of overlap between the 2 funds, so it wouldn’t make a lot sense to carry them each should you’re attempting to get the advantages of diversification in your portfolio. 

It’s additionally price listening to their totally different expense ratios. The Invesco QQQ ETF fees 0.20 p.c (or $20 on a $10,000 funding, yearly), whereas the SPDR S&P 500 ETF Belief fees 0.095 p.c (or $9.50 on a $10,000 funding, yearly). 

There are a number of instruments that may make it easier to consider the overlap of various ETFs. Listed here are a number of the finest:

• ETF Analysis Middle: This web site permits you to enter any two ETF tickers and immediately see how their holdings overlap. You’ll be capable to see the totally different weights in every fund and the entire variety of overlapping holdings.
• ETF.com: This website permits you to simply evaluate two totally different ETFs and permits you to consider extra than simply the overlap in holdings. You’ll be able to see how the funds differ when it comes to value, property, efficiency and extra.
• ETF Database: ETF Database additionally permits you to evaluate totally different ETFs and simply see how comparable their holdings are and the way funds evaluate on technique and different key variables. 

Backside line

Overlap between the holdings in several ETFs you’re invested in might depart your portfolio much less diversified than you understand. Take note of the ETF overlap in your investments to be sure to’re getting the diversification you search. 

If there’s plenty of overlap in your portfolio, you would possibly think about consolidating your holdings into the fund with decrease prices, or diversifying right into a fund with much less overlap. Happily, there are various instruments that may make it easier to evaluate totally different funds and determine when you might have an overlap downside. 

Editorial Disclaimer: All traders are suggested to conduct their very own impartial analysis into funding methods earlier than investing resolution. As well as, traders are suggested that previous funding product efficiency is not any assure of future value appreciation.