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.

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BREAKING DOWN '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 >>
  3. How do dividends affect net asset value (NAV) in mutual funds?

    Distribution of dividends reduces the net asset value (NAV) of mutual fund shares. However, this doesn't mean that fund investors ... Read Full Answer >>
  4. Are mutual funds considered retirement accounts?

    Unlike a 401(k) or Individual Retirement Account (IRA), mutual funds are not classified as retirement accounts. Employers ... Read Full Answer >>
  5. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
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    Mutual funds are not Federal Deposit Insurance Corporation (FDIC)-insured because money invested in funds are not considered ... Read Full Answer >>

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