Your investment portfolio’s overall return depends on the performance of each individual investment in the portfolio. A stock that makes up a greater percentage of your portfolio influences your overall returns more than a stock that makes up a lower percentage. These percentages are also known as a stock’s portfolio weight. The total weight of all investments in a portfolio equals 100 percent. As stock prices change, each stock’s portfolio weight also fluctuates. Calculate these weights periodically to make sure your portfolio stays in line with your investment strategy.
Determine the number of shares you own of each stock in your portfolio. For example, assume you own 1,000 shares of Stock A, 5,000 shares of Stock B and 3,000 shares of Stock C.
Look up each stock’s current market price on any financial website that provides stock quotes, or get the prices from your broker. In this example, assume the prices of Stocks A, B and C are $30, $20 and $25, respectively.
Multiply the number of shares of each stock by its price to determine the market value of your investment in each stock. In this example, multiply 1,000 by $30 to get a $30,000 investment in Stock A. Your other investment values would be $100,000 for Stock B and $75,000 for Stock C.
Add together your investment in each stock. Add the value of the other investments in the portfolio, if any, to your result to determine your portfolio’s total value. Continuing the example, assume Stocks A, B and C are the only investments in your portfolio. Add $30,000, $100,000 and $75,000 to get a total portfolio value of $205,000.
Divide the value of your investment in each stock by your portfolio’s total value. Multiply each result by 100 to calculate the percentage portfolio weight of each stock. Concluding the example, divide Stock A’s value of $30,000 by $205,000 to get 0.146. Multiply 0.146 by 100 to get 14.6 percent. Stock B would make up 48.8 percent of your portfolio. Stock C would make up 36.6 percent. Because Stock B has the highest weight of 48.8 percent, its performance impacts the portfolio’s overall returns more than Stock C and significantly more than Stock A.
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