Investment Terms: What’s Exposure?

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!