Examples
Suppose that Technology stocks make up 10% of the relevant stock index by market value. For example, the weight of the Technology sector in the index could be 10%.
Overweight — Suppose that an investor holds 15% of his/her investment in Technology stocks. The investor's stock portfolio is then 5% overweight in Technology stocks.
Suppose further that the investor is advised by his broker or financial adviser that Technology should be "overweight". The investor is being advised to hold more investments in Technology, as a percentage, than the weight of that asset in the index/market. In this example, the recommendation is to hold more than 10% by value of Technology shares.
Underweight — In contrast to overweight holding, if the broker advises that Technology should be "underweight", the recommendation to the investor is to hold less than 10% by value of Technology shares.
Equal weight - The third possibility is that the broker advises that Technology should be "equal weight". In which case, the recommendation is to hold 10% by value of Technology shares.
Read more about this topic: Overweight (stock Market)
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