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One flexi-cap, one mid-cap, one small-cap fund. Is your portfolio really diversified? Experts explain
Mint 3 hrs ago·14 Sept 2026, 1:40 am
Investors often believe that owning a single fund from different market caps—such as a flexi-cap, mid-cap, and small-cap scheme—guarantees a diversified portfolio. However, having three funds does not automatically ensure this. These funds may hold overlapping stocks, meaning your investments are concentrated in the same companies rather than spread across the market. This can expose you to higher risk than you realize.
For retail investors, this is a critical point to understand. If your funds are heavily concentrated in a few large stocks, your portfolio's performance will move in tandem with those specific companies. To truly diversify, you must look beyond just the fund's market-cap label. It is essential to check the stock overlap and sector exposure to ensure your money is actually spread across different industries and companies.
Moving forward, investors should review their current holdings to identify any hidden overlaps. Adding more funds without analyzing existing ones can sometimes increase concentration rather than reduce it. The key is to build a portfolio where the combined holdings provide true breadth across sectors and market segments, protecting your wealth from the volatility of any single stock or industry.
Excerpt from Mint
One flexi-cap, one mid-cap and one small-cap fund may be enough for diversification, but three schemes do not automatically mean a well-diversified portfolio. Experts explain why investors should check stock overlap, sector exposure and risk before adding more mutual funds. Investors often assume that spreading their…Read the original at Mint
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- Category: Sector.
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