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An Underweight position in a Stock Portfolio occurs when the holding in either an individual Stock or the combined Stocks in a Sector is less than the weighting in the Benchmark Index.

As discussed in the definition for Overweight, investors may choose to monitor their performance against a Benchmark Index, very common for Mutual Funds. An Underweight position in a Stock is where an investor considers the Stock’s valuation dynamics to be unfavourable. The position held in their Stock Portfolio will be less than what the Stock is weighted in the Benchmark Index. OK, so why not Sell the Stock altogether? This is of course an acceptable option, but it widens the tracking error against the Benchmark Index. Also, even when a Stock’s valuation is unfavourable, the dynamics driving the Stock Market do change and they can change quickly. Even a small investment in a Stock keeps it on “the radar”, this is up to your discretion as an investor.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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