Exposure

What is exposure?

It is a key – perhaps the key – investment concept. In some ways it's similar to risk, but has fewer negative connotations. Whereas risk is an unavoidable aspect of financial markets, to be minimised where possible, investors can actively seek exposure to various asset classes.

Where have you heard about exposure?

As an investor, you will be aware of the notion of exposure, both in terms of the extent to which you face potential downsides and with regard to your position in a particular asset class, such as a share or currency

What you need to know about exposure...

Exposure is an umbrella concept beneath which sit three distinct meanings. The first is the current market value of someone's open trading positions, including, of course, the impact on exposure of any leverage by way of derivatives. The second refers to the total amount of risk at any given moment, while the third refers to the percentage of an investment fund or trust that is invested in a particular market or asset.

In all three cases, what is being discussed is the extent of someone's commitment to one or more assets.