Underweight

Underweight

An situation where a portfolio does not hold a sufficient amount of securities to satisfy the accepted benchmark of the portfolio's asset allocation strategy.

Notes:

For example, if a portfolio normally holds 40% stock and currently holds 30%, the position in equities would be considered underweight.

See also: Benchmark, Overweight, Portfolio, Portfolio Management

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Underweight

Usually refers to recommendation that leads an investor to reduce their investment in a particular security or asset class. The reduction is usually with respect to a benchmark. Suppose that U.S. equities compose 40% of the benchmark portfolio. If one thinks the U.S. will underperform, the investor may reduce the exposure to U.S. equity to less than 40%.