### What is Portfolio Weight

Portfolio weight is the percentage composition of a particular holding in a portfolio. Portfolio weights can be calculated using different approaches; the most basic type of weight is determined by dividing the dollar value of a security by the total dollar value of the portfolio. Another approach is to divide the number of units of a given security by the total number of shares held in the portfolio.

### BREAKING DOWN Portfolio Weight

Portfolio weights are not necessarily applied only to specific securities. Investors can calculate the weight of their portfolios in terms of sector; geographical region; index exposure; short and long positions; type of security, such as bonds or small-cap technology companies; or any other type of benchmark. Essentially, portfolio weights are determined based on the particular investment strategy. Portfolio weights related to market values are fluid because market values change daily. Equal-weighted portfolios must be rebalanced frequently to maintain a relative equal weighting of the securities in question.

### Example of Portfolio Weight

The SPDR S&P 500 ETF is an investment vehicle that tracks the performance of the S&P 500. It does this by holding the weights of each stock in the index with respect to each stock's total market capitalization divided by the total market capitalization of the S&P 500. For example, say Apple Inc. accounts for 3% of the S&P 500 and Microsoft Corporation makes up 2%; the ETF then has 3% in Apple and 2% in Microsoft, with respect to market capitalization to replicate the S&P 500. These weights are subject to change, and such an ETF rebalances accordingly.

As each individual stock has a weight in the ETF according to its weight by market capitalization in the S&P 500, the corresponding weights of each sector are also represented in the ETF. If technology stocks hold the greatest weight in the S&P 500 at 20%, then the replicating ETF also holds 20% in technology.

Weights can be calculated for industries, sectors, geographies and asset classes according to the investment strategy desired. The total weight of a portfolio should equal 100%. Short positions and borrowings are considered negative values and carry negative weights.

### Calculating Portfolio Weight

To get the market value of a stock position, simply multiply the share price by the number of shares outstanding. If Apple is trading at $100 and there are 5.48 billion shares outstanding, then Apple's total market capitalization is $548 billion. If the total market capitalization of the S&P 500 is $18.3 trillion, then Apple's weight by market capitalization in the S&P 500 is 3%, or $548 billion / $18.3 trillion x 100 = 3%.