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When you own less of a security, an asset class, or a subclass than your target asset allocation calls for, you are said to be underweighted in that security, asset class, or subclass.
For example, if you have decided to invest 30% of your portfolio in fixed-income investments, but your fixed-income holdings account for only 10% of your portfolio, you are underweighted in fixed income.
In another use of the term, a securities analyst might recommend underweighting a particular security, which you might reasonably interpret as advice to sell.
- Browse Related Terms: Asset allocation, Asset class, Balanced fund, diversification, Family of funds, Financial plan, Fund of funds (FOF), Lifecycle fund, Modern portfolio theory, Nonsystematic risk, Overweighted, portfolio, subclass, Synthetic investment, Target date fund, Target risk fund, Underweighted, White knight