Overweight and underweight

The terms overweight and underweight are used by brokers and fund managers to indicate their preference for stocks or markets relative to particular indices or benchmarks.

If, for example, a fund manage who uses the FTSE 100 as a benchmark says he is overweight BT, he means that he holds a greater percentage of BT shares in his portfolio than BT’s weighting in the FTSE 100. If he is underweight he means the opposite.

Stock brokers often use the terms over and underweight to make their views on stocks clear. If they rate a stock overweight it suggests that they expect it to outperform the market. An underweight rating suggests they expect it to underperform the market.

• See Tim Bennett’s video tutorial:What is an index?

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