The quick answer
Start here
Owning several ETFs does not automatically create a diversified portfolio. Funds can hold the same companies, sectors or markets, so the combined exposure matters more than the number of ticker symbols. Use current issuer holdings and investment objectives, calculate important overlaps and check what genuinely changes when a fund is added. This worksheet explains the method without recommending an allocation or claiming that diversification prevents losses.
Count the underlying exposure rather than the fund labels
Two differently named funds may hold many of the same investments. A broad market fund and a sector-focused fund can overlap substantially even if their descriptions sound unrelated. Adding the second fund might increase an existing concentration rather than introduce a new source of return.
MoneySmart explains diversification as spreading exposure across and within investments. The relevant question is how the whole portfolio behaves, not how many products appear in an app. Even a single broad fund can contain many holdings, while several narrow funds can remain concentrated.
Start by writing what each investment is intended to add. It might be a market, asset class or style that is currently underrepresented. If the explanation is simply “another ETF is safer,” inspect the holdings before relying on that belief.
Calculate a simple weighted overlap
Imagine a fictional $20,000 portfolio: $12,000 in Fund A and $8,000 in Fund B. Fund A allocates 10% to Company X, while Fund B allocates 30%. The combined exposure is $1,200 plus $2,400, or $3,600. Company X represents 18% of the total portfolio.
The portfolio weights are 60% in A and 40% in B. The same result comes from 60% × 10% plus 40% × 30% = 18%. Averaging the two company percentages equally would give 20%, which is wrong because the fund amounts are unequal.
These are invented holdings, not current market data. Repeat the method for any company, sector or country you need to examine. Keep the date of the holdings disclosure because weights change and published lists can use different update schedules.
A top-ten list is a starting point, not a complete analysis
An issuer’s largest holdings can reveal obvious overlap. It cannot show every duplicated exposure, particularly across funds with many smaller positions. A sector percentage may also use a classification system that differs from another provider’s.
Find the full holdings or exposure report where available, and read the investment objective and index methodology. Check whether the product holds securities directly, uses derivatives or follows a narrow theme. The word “global” does not by itself tell you the country or company concentration.
Record unavailable information as unknown. Do not create a precise overlap score from two incomplete lists and present it as a full portfolio audit. If you need a detailed assessment, supply the current disclosures and complete holdings to an appropriately qualified adviser.
Look beyond company names
Different companies can still respond to the same economic drivers. A portfolio concentrated in one industry, commodity or country may have substantial common risk even when no single name is repeated. Currency exposure and the use of hedging can also change the experience.
Consider a fictional household whose salary, home and investment portfolio all depend heavily on the same local industry. An additional investment in another company in that industry may not provide the independence the household expects. The comparison should include the wider financial situation, not only the brokerage account.
This does not establish a required overseas allocation or a particular product choice. It shows why a holdings spreadsheet is one part of risk assessment. Time horizon, liquidity needs, debt and the ability to tolerate losses remain relevant.
Check whether the extra fund changes the intended mix
Suppose a portfolio is $15,000 in a broad fund. Adding $5,000 to a second fund creates a 75% and 25% split. If the new fund concentrates in a sector already held by the first, the combined sector weight can rise significantly.
Use the same weighted method before and after the purchase. Write the current exposure, proposed exposure and reason for the change. A new product should have an identifiable role even if that role is consciously increasing a concentration.
Avoid judging the change only by recent performance. A strongly performing theme can already have become a larger part of the portfolio through price movement. Adding more because it recently rose is a different decision from restoring a documented long-term allocation.
Diversification has limits
MoneySmart notes that diversification can reduce the impact of some investments performing poorly. It does not promise that a portfolio will never fall. Different assets can move together during stressed periods, and liquidity or currency effects may matter when money is needed.
The ASX’s ETF education also discusses the range of exchange-traded product structures and risks. A list containing several complex or leveraged products should not be treated as equivalent to a straightforward mix of underlying assets. Understand the actual mechanism before combining them.
Write the risks that remain after diversification. A household could still face market losses, an unfavourable exchange rate, a short spending deadline or a product-specific problem. Naming those limits makes the diversification decision more useful than calling a portfolio “safe.”
Sources: MoneySmart: investment diversification · ASX: ETFs and other exchange traded products
Avoid unnecessary trading just to improve a spreadsheet
Discovering overlap is information, not an automatic instruction to sell. A sale can create brokerage, tax consequences and a period out of the market. Existing overlap may be deliberate or tolerable within the wider plan.
Compare possible responses, including directing future contributions differently, reviewing the allocation with an adviser or making no immediate change while obtaining missing information. This article does not decide which response suits your circumstances.
Keep the decision record separate from the calculation. The calculation might say Company X is 18% of the portfolio. The decision requires a reasoned view about whether that exposure fits the goal and what a change would cost. A precise percentage alone does not supply that judgement.
Create a review that stays manageable
List fund names, amounts, underlying objectives, major exposures, fees and the date of each source. Calculate only the exposures material to the question you are asking. Revisit after a substantial contribution, product change or major shift in weights rather than reacting to every daily price movement.
Elaris does not fetch ETF holdings, calculate live overlap or recommend a portfolio allocation. Its super projection can explore a stated return and contribution assumption, but the entered return does not validate the investments chosen to pursue it.
Use primary issuer disclosures for the holdings and keep any estimates labelled. A short, accurate account of what is known and why an investment is held is more useful than a large chart built from stale or incomplete data.
Make the concentration tangible in dollars as well as percentages. In the fictional example, a 30% fall in Company X alone would reduce the $3,600 exposure by $1,080 if all other holdings stayed unchanged. That is 5.4% of the $20,000 portfolio. Real exposures will not remain independent in that way, so this is an isolated arithmetic stress test. It helps a household understand the size of one concentration without pretending to simulate the whole market.
Even making the fund amounts look more equal can increase an underlying concentration. In the fictional example, adding $4,000 to Fund B produces $12,000 in each fund and $24,000 overall. Company X then represents $1,200 from A plus $3,600 from B, or 20% of the portfolio. That is higher than the original 18%. The product weights are more balanced while the company exposure is more concentrated, which is why the look-through calculation matters. Round displayed percentages only after combining the underlying dollar exposures, so small rounding differences do not compound.
FAQ: Does owning five ETFs mean I am diversified?
Not necessarily. All five could hold the same market or sector. Look through to the underlying exposure and weight each holding by the amount invested. Product count is a poor substitute for understanding what assets the household actually owns.
FAQ: Is overlap always a mistake?
No. Some overlap may be intentional, such as choosing a larger exposure to a market already present in a broad fund. The important point is to identify it and understand the resulting concentration. A duplicate holding becomes a problem when it contradicts the plan or is misunderstood.
FAQ: Can I use last year’s holdings report?
It can provide context, but it may not describe current exposure. Check the latest available issuer disclosure and note its date. If funds publish different levels of detail, acknowledge that limitation instead of presenting an exact current overlap figure.
FAQ: Should I sell the smaller overlapping fund?
The calculation cannot decide that. Consider the investment’s intended role, transaction costs, tax and the wider allocation. Obtain individual advice where needed. Automatically selling the smaller holding may remove a feature you wanted or create an unnecessary cost.
Put the next step into practice
Use your own confirmed figures and keep outstanding questions visible. Core tools are free, with no bank connection or compulsory account.
Open the Super projection ↗Sources and editorial notes
Sources checked 24 October 2026. Worked examples are fictional illustrations. Rules, eligibility and product terms can change; use the official source for your circumstances.
- MoneySmart: investment diversification ↗
- MoneySmart: exchange traded funds ↗
- ASX: ETFs and other exchange traded products ↗
General information, not an individual financial or legal assessment. AI-assisted drafting with source checks; independent professional review has not been completed. How we prepare our guides · Suggest a correction