ETF ACADEMY: Checking for Overlap

When evaluating ETFs for your portfolio, one of things you should check is if the fund is holding stocks that you already have exposure to through other ETFs.

The pros call holding the same security across multiple funds overlap. The idea is to avoid going through the time and expense of evaluating and adding another fund if it is going to be redundant.

One way to check for overlap is to use a tool on Yahoo! Finance called Components. For example, pull up the Yahoo! finance page for Google. Go to the navigation bar on the left side of the page and click on Company>Components. In the center of the page, Google lists all of the ETFs that hold Google as a top 10 holding.

Notice that FDN, FPX and IYW all hold over 5% of their assets in Google. So if you already own one of these ETFs, you should either add to that position or find another ETF not on this list for diversification and to avoid the redundancy that comes with overlap.

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