How much of a portfolio overlap is acceptable while choosing different funds?
It should be as little as acceptable because if there is a 50-70 per cent overlap then this diversification is only optical. Actually, there is very less diversification. You think that you have bought two-three investments but the underlying is common across the funds. The whole idea of spreading your risks over different funds should be that you are getting different services, different experiences or different character of the market.
But it also depends in which category you are investing. In case of fixed income funds, where the objective is not to diversify but to have a high quality investments, there is bound to be substantially higher amount of duplication. But in case of equity, the least of overlap is more desirable.