Fund Overlap

Any financial advisor will tell you to diversify. If you meet a former financial advisor living under a bridge and eating garbage out of a dumpster, they'll tell you to diversify. Talk to a high-powered financial advisor while skinny dipping in a swimming pool full of Dom Perignon at Beyonce's post-Oscars party, that champagne-soaked advisor will tell you to diversify. Everyone will tell you to diversify.

However...sometimes, you think you're diversified, but you're really not.

Take fund overlap. This situation comes up when you buy a bunch of different mutual funds (trying to diversify), but it turns out those funds own many of the same stocks.

You buy into Power Money's Global Leaders fund, which invests heavily in Amazon, Apple, and Microsoft. Meanwhile, you have money in InvestTech's Tech Winners fund, which (you guessed it) also invests heavily in Amazon, Apple, and Microsoft. Different funds. Same stocks. Fund overlap.