## 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.

Next Up

## 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%.

RELATED TERMS
1. ### Weighted Average Market Capitalization

Weighted average market capitalization refers to a type of stock ...
2. ### Weighted

Weighted is a description of adjustments to a figure to account ...
3. ### Weighted Alpha

Weighted alpha is a weighted measure of how much a stock has ...
4. ### Capitalization-Weighted Index

Capitalization-weighted index is a market index in which stocks ...
5. ### Standard & Poor's 500 Index - S&P ...

The Standard & Poor's 500 Index - S&P 500 is a market capitalization ...
6. ### NASDAQ-100 Equal Weighted Index

The equal-weighted version of the NASDAQ-100 Index, which consists ...
Related Articles
1. Investing

### S&P 500 ETFs: Market Weight Vs. Equal Weight (RSP, SPY)

Both S&P 500 and S&P 500 EWI indexes include the same set of stocks, but different weighting strategies give them separate individual properties.
2. Investing

### Choosing The Right ETF Index To Reach Your Goals

The key to choosing ETFs for your portfolio is understanding how they pick stocks and making sure their investment philosophy matches yours.
3. Investing

### 3 Types Of Indexing For ETF Success

ETF success relies on the index with which it's paired. Discover three index genres for tracking average market performance.
4. Investing

### Rebalance Your Portfolio to Stay on Track

Like a tune-up for a car, this realignment should minimize trouble down the road. Learn how to use rebalance as a strategy to minimize your portfolio risk.
5. Investing

### VTI: Vanguard Total Stock Market ETF

Learn how the Vanguard Total Stock Market ETF provides an extremely diversified exposure to the entire universe of US securities with low expenses.
6. Investing

### Best Vanguard Funds Suitable for a Dividend Strategy

Learn about options from Vanguard for dividend investing strategies. Learn about the risks of investing in funds focused on dividends.
7. Investing

### Strategies For Determining The Market's True Worth

Learn the strengths and weaknesses of passive and active management when trying to uncover the overall market's worth.
8. Investing

### Examining the Tech Sell-Off

It's not 1999 or 2000, but technology valuations are rising, and that could be a cause for concern.
9. Investing

### 4 ETFs To Play A Booming Healthcare Sector

The healthcare sector is performing the best so far in 2013. We look at four ETFs to play the sector's momentum.
10. Investing

### The Old Dow Gets a New Look

This new ETF brings a fresh perspective to the Dow.
RELATED FAQS
1. ### Weighted Average Shares Vs. Outstanding Shares

What's the difference between weighted average shares outstanding and basic weighted average shares? Read Answer >>
2. ### What is the weighted average of outstanding shares? How is it calculated?

The weighted average of outstanding shares is a calculation that incorporates any changes in the amount of outstanding shares ... Read Answer >>
3. ### How are S&P 500 index components weighted?

Learn about how components of the S&P 500 are weighted, and how this calculation favors certain stocks in being more representative ... Read Answer >>
4. ### Calculate the profit and loss of your portfolio

Finding the total percentage gain or loss on a portfolio requires simple calculations, but first, you should understand how ... Read Answer >>
5. ### What is the difference between the expected return and the standard deviation of ...

Learn about the expected return and standard deviation and the difference between the expected return and standard deviation ... Read Answer >>
Hot Definitions
1. ### Discount Rate

Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
2. ### Economies of Scale

Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
3. ### Quick Ratio

The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
4. ### Leverage

Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
5. ### Financial Risk

Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
6. ### Enterprise Value (EV)

Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...