Part 4/7:
Another common misstep in investment management is the unintentional doubling up or overlap of index funds within a portfolio. Many investors may start with a few funds, only to accumulate a handful over time without realizing their investments duplicate coverage of the same underlying assets.
Consider an example: if you hold both a global index fund and an S&P 500 index fund, your allocation may not be as diversified as you presume. The S&P 500's focus on U.S. companies means that by holding both funds, you might be disproportionately investing in a concentrated group of top U.S. stocks, which your global fund already includes.
Simplifying your investment portfolio by avoiding overlap can help you maintain clarity and effectiveness in your investment strategy.