- Exposure is anytime you are financially exposed to risk and exposed to potential reward.
What does exposure mean in finance talk?
Exposure is anytime you are financially exposed to risk and exposed to potential reward.
But to get a bit more specific — exposure is when you use your capital to purchase an ownership interest and participate in the performance of an asset.
Let’s unpack that jargon heavy sentence. It will only take a moment.
By capital, we finance folks just mean money. Ownership interest means anything you’ve got a right to, legally. (The stuff you can manage, sell, or donate.) And an asset is something you own! (i.e. a stock, bond, or ETF)
FYI: Equity exposure is the percentage of a portfolio that is made up of equity, or shares!