Financial analysts identify overlapping holdings as risk in index fund portfolios

Financial analysts have warned that investors who own several index funds may be taking on a hidden risk called portfolio overlap. This happens when different funds hold the same stocks, so an investor ends up owning the same company many times without knowing it. Popular AI stocks, for example, appear at the top of many funds today. Owning the same stocks twice does not make a portfolio more diverse. It can also cost more, because each fund charges a fee that reduces returns. Free tools are available to check how much two funds share in common. Analysts also note that during periods of high market volatility, some ETFs can face liquidity problems when key market participants stop trading.