Own flexicap and large-cap funds? Nearly 64% of their equity exposure may be common

Owning four or five mutual funds can make your portfolio look diversified. But are those funds actually giving you four or five different sets of investments?

Not necessarily.

If you already own a flexicap fund and then add a large-cap fund for diversification, a sizeable part of the equity exposure may already be common between the two.

DSP Mutual Fund’s September Netra report finds that 63.8 percent of the large-cap exposure was already present in the average flexicap portfolio. The overlap is even higher when flexicap funds are combined with some other categories.

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Flexicap & large cap: Where is the overlap?

First, what does this overlap actually mean? It doesn’t simply mean that 64 percent of the stocks in a flexicap and large-cap fund are identical. DSP looks at the common equity exposure between the portfolios.

Put simply, if both categories have exposure to many of the same stocks, adding the second fund may not give your portfolio as much new exposure as you expect.

DSP studied the average portfolios of different mutual fund categories and compared them with flexicap funds.

How much equity exposure is common between flexicap and other fund categories

DSP Netra, September 2026

The numbers make the issue easier to see.

An investor holding a flexicap fund and adding a balanced advantage fund, for instance, may find that 75.3 percent of the equity exposure is already common. With a large & mid-cap fund, it is 71.5 percent.

Even a mid-cap fund, which might appear quite different from a flexicap fund based on its category label, has 53.4 percent common equity exposure in DSP’s analysis.

But isn’t a flexicap fund supposed to invest everywhere?

This is where the nature of the category matters.

Flexicap funds can invest across large-, mid- and small-cap stocks without having to maintain a fixed allocation to each market-cap segment. That flexibility means their portfolios can already contain exposure that investors may later try to add through separate large-cap or mid-cap funds.

So simply owning funds with different category names doesn’t automatically mean the underlying portfolios are very different.

Also Read: Large cap, flexi cap, multi cap or midcap: What role does each mutual fund play in your portfolio?

Does overlap mean you shouldn’t own both?

Not necessarily.

Some overlap is natural, particularly when funds invest in parts of the same market. Two funds can also have different investment styles, allocations and portfolio weights even if several underlying stocks are common.

The more useful question for an investor is what the additional fund is actually bringing to the portfolio.

For instance, if you already have a flexicap fund and are considering adding a large-cap fund, check whether the second fund meaningfully changes your overall exposure or largely increases your allocation to stocks you already own indirectly.

The same applies when adding funds simply because they belong to different categories.

Also Read: Mid- and small-cap funds continue to draw investors despite volatility and valuation concerns. What is driving the interest?

More funds don’t always mean more diversification

Diversification is ultimately about spreading exposure, not collecting fund names.

An investor can hold several mutual fund schemes and still have considerable exposure to the same parts of the equity market. On the other hand, a smaller number of funds with genuinely different portfolios may provide more meaningful diversification.

So before adding another mutual fund, it may be worth looking beyond the category label. The question isn’t just how many funds you own, but how different those funds actually are underneath.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.