Financial Exposure

What is 'Financial Exposure'

Financial exposure is the amount that one stands to lose in an investment. For example, one's financial exposure in his/her automobile would be the initial investment amount (cost) minus the insured portion (if any). Knowing and understanding one's financial exposure is a crucial part of the investment process.

BREAKING DOWN 'Financial Exposure'

Financial exposure is really just another name for risk. As a general rule, investors are always seeking to limit their financial exposure, while maximizing their profits. For instance, if one bought Acme Widgets at $10 per share and sold half of those shares when the stock reached $15, one has effectively cut his or her financial exposure in half, which is precisely why some investors utilize such strategies.

RELATED TERMS
  1. Net Exposure

    The percentage difference between a hedge fund’s long and short ...
  2. Exposure Netting

    A method of hedging currency risk by offsetting exposure in one ...
  3. Gross Exposure

    The absolute level of a fund's investments.
  4. Credit Exposure

    The total amount of credit extended to a borrower by a lender. ...
  5. Structured Investment Products ...

    A type of investment specifically designed to meet an investor's ...
  6. American Shares

    A term used outside of the United States to describe the stock ...
Related Articles
  1. Trading

    Exchange Rate Risk: Economic Exposure

    Investopedia explains: In the present era of increasing globalization and heightened currency volatility, changes in exchange rates have a substantial influence on companies’ operations and profitability. ...
  2. ETFs & Mutual Funds

    4 Ways to Get International Exposure in Your Portfolio

    International investing provides diversification, which is needed these days. When it comes to investing in foreign stocks, there are lots of options.
  3. ETFs & Mutual Funds

    Increase Exposure To Technology Using ETFs

    If the bull market continues, increasing exposure to technology companies may prove a solid bet. Here are a few suggestions.
  4. Managing Wealth

    Why You Need More International Stocks

    Despite the benefits of global stocks, most investors never stray from their home nations when it comes to portfolio construction.
  5. Managing Wealth

    “Cautious” Investors: Saying One Thing, Doing Another

    Five years into an equity bull market, investors say they’re still cautious. However, Americans hold as much risk in their financial portfolios as they did during the tech bubble in 2000.
  6. Markets

    Global Communications: Exploring Revenue Trends and Fundamentals

    Explore geographical communications sector revenue data to determine which countries have the highest exposure and what factors are driving trends.
  7. ETFs & Mutual Funds

    Top Emerging Markets Dividend ETFs

    These dividend ETFs offer similar — yet different — ways to play emerging markets.
  8. Trading

    Global Utilities: Exploring Revenue Trends & Fundamentals

    Analyze global revenue exposure in the utilities sector to learn about the impact of currency, regulation and economic growth on geographic contributions.
  9. Personal Finance

    Buying A Car: The Worst Investment?

    An automobile is considered to be one of the worst investments that can be made, but there are ways to turn that negative into some positive gains.
  10. Managing Wealth

    A Guide To Real Estate Derivatives

    These instruments provide exposure to the real estate market without having to buy and sell property.
RELATED FAQS
  1. What kind of stocks should I buy (Ex. Oil, Gold, Consumer, Bio, or Tech)?

    How many stocks should be in a buy and hold strategy? At what percentage gain should I start taking real prof... Read Answer >>
  2. To what extent do banks have exposure to different business lines?

    Learn how banks are exposed to risk and what the different types of exposure mean. Find out about the 2014 U.S. commercial ... Read Answer >>
  3. What are some of the key risks of investing in the financial services sector?

    Learn about the risks that come with investing in the financial services sector, so that those risks can be recognized and ... Read Answer >>
  4. What techniques are most useful for hedging exposure to the automotive sector?

    Learn how investing in noncyclical and counter-cyclical sectors helps investors hedge against exposure to automotive and ... Read Answer >>
  5. What is the ideal number of stocks to have in a portfolio?

    First off, there is no single correct answer to this question - it will depend on a number of factors such as your country ... Read Answer >>
  6. What risks do I face when investing in the insurance sector?

    Read about the unique challenges faced by insurers, and learn how those challenges manifest themselves as risks for equity ... Read Answer >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  5. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  6. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
Trading Center