How To Check Your ETF Overlap

Since we are now getting into ETFs and building the FIRE program I wanted to highlight a cool tool I found that can be very helpful. It's helpful in a way to quickly check how much overlap your ETFs have and in what areas. For a quick example you might think your diversifying your portfolio but in reality the two ETFs you just bought might be heavily weight in a single stock like Apple.

Now I don't think that's a bad thing and it's totally up to you how you want to invest. That being said...
* This article is for entertainment purposes only and is not financial advice. Do your own research before investing and understand the risks.

Now to me I've tried the diversified rout a few times and I have to say I actually don't like it and it's a dumbed down way to invest for people who legit don't care and just throw money in. But if you do care, have a decent understand and know how to look up info then to be diversification can kick you in the butt.

You might know of a group of stocks that have and most likely will perform well in the future but instead of going heavily into them you might diversify thinking it's the smart right thing to do. But those heavily invested and making money who know what they are doing will tell you you're leaving a TON of money/assets on the table doing so.

As an example in the last two years. I only lightly invested into SOFI and instead spread my income out across many stocks. If I would have instead focused more of that money on SOFI only I'd have a lot more capital than what I have today being that the stock is up over 200% since I bought it.

The Tool

The tool I use is called etfrc.com and in the part in particular would be the Funds > Overlap option under ETF Tools.

Yesterday we talked about the following ETFs as growth ETFs on DGRO, SCHD, VTI and SPYG it might not make sense to be invested in all of them and instead pair down to just two.

If we take for example DGRO and SCHD we can see that investing in both of these can make a lot of sense being that there's only a 18% overlap in weight seen here...

We also get a break down of what that overlap is in what stocks.

Compare that to something like DGRO and VTI we see a rather large overlap of 41%

This gives us a quick overview of investments we might want to take. This also helps with buying each stock as you might not want to buy more Home Depot stock since you're already pretty heavily invested in it via your ETF.

Just a bit of a short post today to highlight this cool tool I found that you might find helpful for yourself. It's also free to use and provides a good amount of data on the free plan.