What is the market exposure?
In investment conditions, the market exposure has to do with the amount or percentage of the investment portfolio, which is associated with a given type of investment or investment that is concentrated on a specific industry. Given that the percentage of the total value of the portfolio invested in the industry is increasing, so the market is equal to the investor in this market. Understanding the degree of exposure associated with different investments is an essential tool to create a balanced portfolio, where the value of the portfolio is less subject to the market decline.
The easiest way to understand the market exposure is to look at how it is calculated. For example, if the investment portfolio is $ 100,000 in US dollars and half of this value is in the form of stocks issued by important department stores, then the investor has a 50%market exposure in the retail industry. Assuming that a quarter of the total portfolio value is inventionfolio TED in stocks issued by manufacturers BudoV brings 25% market exposure in the construction industry.
Some series of circumstances should adversely affect the profits of retail companies in general, the high market exposure of the investor in this industry would cause a significant decrease in the total portfolio value. Although losses can be alleviated by the corresponding rise in the construction industry, the high concentration of investment in one industrial sector could still lead to financial problems for the investor. For this reason, financial analysts can recommend limiting the investor's market exhibition to any of the industry relatively small percentage. This makes it easier to compensate for losses in one industry with an increase in others and thus maintain the total portfolio value.
In order to manage the market on the market, investors must pay close attention to how they perform an asset allocation. Ensuring the diversification of investment found in the portfolio, not just the issuer butAlso, the type of industry will reduce the risk of loss, while the potential to increase the portfolio remains high. In order to maintain a balance of this type, it is important that the investor is constantly aware of the development of trends in industries represented in the portfolio, including projections where these markets move in the next six months. At the same time, attention is also important to the financial outlook for companies that issue shares that make up the portfolio. This is because an individual company can undergo a serious financial reverse that affects the value of its shares, even if the industry as a whole is doing very well.