Overweight

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DEFINITION of 'Overweight'

1. A situation where a portfolio holds an excess amount of a particular security when compared to the security's weight in the underlying benchmark portfolio. Actively managed portfolios will make a security overweight when doing so will allow the portfolio to achieve excess returns.

2. An analyst's opinion regarding the future performance of a security. Overweight will usually signify that the security is expected to outperform either its industry, sector or, even, the market altogether.

INVESTOPEDIA EXPLAINS'Overweight'

1. Securities will usually be overweight when a portfolio manager believes that the security will outperform other securities in the portfolio. An example of overweighting a security would be when a portfolio normally holds a security at a weight of 15%, and the security's weight is raised to 25% in an attempt to increase the returns of the portfolio.

2. An example of an analyst's rating of overweight would be: The stock's return is expected to be above the average return of the overall industry over the next eight to 12 months. Specific analyst definitions vary regarding the time frame used and the benchmark the security is compared against.

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RELATED FAQS
  1. When might an analyst take an overweight position in a particular stock?

    An analyst may take an overweight position in a stock when he has a high degree of conviction that the stock will outperform. ... Read Full Answer >>
  2. Why do analysts sometimes give an overweight recommendation on a stock?

    Financial analysts give their opinions of the future performance of a security. They can give performance ratings of underweight, ... Read Full Answer >>
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    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
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    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
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