neutral weight – when a portfolio holds the same amount of an asset as the index
Neutral weight is used as a relative term, generally regarding an index and in the context of a benchmark.
Stock A is 10% of an index. A portfolio holds 10% of Stock A. The portfolio has a neutral weight to Stock A
Germany is 10% of the European Index. Portfolio holds 10% and is neutral weighted
If stock A’s share price rises, the portfolio performs in line with the index because it holds the same as the index
If German markets fall, the portfolio performs in line with the index because it holds the same as the index