Hidden Overlap in Your Portfolio

Today’s Market Update

It was a decent day in the markets as most sectors were trending up and some even made new highs. The FOMC meeting is scheduled for tonight, and all eyes are on whether the US Federal Reserve will cut rates or not.

The market overall looks quite strong and appears headed upward. Nifty has once again crossed the 26,000 mark, closing at 26,053, up about half a percent. FIIs have paused their selling and some buying has returned.

• Nifty Junior had a strong day with a 1.4% rise, challenging its recent highs.

• Midcaps closed 0.58% higher, crossing the July hump, while Smallcaps also rose by 0.45% and broke a downward trendline, although not as strongly as others.

• Nifty Bank continued its winning run, closing at another record high of 58,385, up 0.29%.

• Gold is also showing signs of a comeback. It touched its trailing moving average and bounced back.

• Gold rose 1.8% today, and silver too formed a bullish doji pattern, suggesting possible further gains. The setup for precious metals looks very positive right now.

Other Market Triggers

• On the Nifty heatmap, Reliance, ICICI Bank, SBI, JSW Steel, Tata Steel, Sun Pharma, Adani Ports, and several energy stocks like NTPC, Adani Green, and ONGC were among the key gainers.

• Adani Ports jumped 2.6%, and Varun Beverages saw a huge 9% surge. IOC gained 5.5%, Adani Green shot up 10.8%, and other energy stocks like Tata Power, GAIL, and CG Power also rallied.

• The mover of the day was Blue Dart, which shot up 18% after strong Q2 profit numbers.

U.S. Market Update

• In the US markets, NASDAQ jumped 0.8%, Dow Jones rose 0.34%, while the S&P 500 saw modest gains.

• UPS surged 8%, Intel and Nvidia both gained around 5%, and PayPal and Broadcom also moved up. Many of these stocks are part of the Weekend Investing portfolio on the Vested platform.

What to watch next ?

• The next few days will be crucial — if gold crosses the current level and closes higher, it might make a move towards a new high above 12,500. A close above that could trap short sellers and take prices closer to 13,250.

• The market seems to be expecting a surprise in the FOMC meeting, and the result of that decision will likely impact emerging markets, including India.

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Unveiling the Hidden Overlap in Your Portfolio

The Illusion of Diversification 🤯

Many investors believe that by simply investing in funds from different Asset Management Companies (AMCs), or by picking different small cases or PMS strategies, they are automatically achieving sufficient diversification.

However, recent data from Fynprint reveals a surprising truth: there's often a significant overlap in the underlying stock holdings of seemingly distinct funds. This means you might be holding the same stocks across multiple investments, which severely diminishes the true diversification benefits you seek.

The Overlap Revealed 📊

The analysis highlights concrete examples of this substantial overlap across various fund categories. These numbers serve as a crucial wake-up call for investors who blindly allocate capital based on brand or fund name alone:

Key Learning💡

The core message is clear: Blind allocation to different AMCs, small cases, or PMSs does not guarantee diversification.

True diversification comes from the difference in the actual assets (stocks) held by your investments, not just the name of the fund house or strategy. Significant overlap undermines your risk mitigation strategy.

Your goal should be to maximize unique exposure across different sectors, market capitalizations, and investment styles. A simple check for stock overlap can be the difference between a truly resilient, diversified portfolio and one with hidden concentration risk.

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