1. What is Exposure Percentage?

Exposure percentage represents the proportion of a portfolio allocated to a specific position or investment. It helps investors understand their risk concentration and diversification levels across different assets.

2. How Does the Calculator Work?

The calculator uses the exposure percentage formula:

Where:

• \( \text{Position Size} \) — Value of the specific investment position in dollars
• \( \text{Portfolio} \) — Total value of the investment portfolio in dollars

Explanation: The formula calculates what percentage of the total portfolio is allocated to a particular position, helping investors manage risk and diversification.

3. Importance of Exposure Calculation

Details: Calculating exposure percentage is crucial for risk management, portfolio diversification, and ensuring that no single position represents an excessive portion of the overall portfolio that could lead to significant losses.

4. Using the Calculator

Tips: Enter the position size in dollars, the total portfolio value in dollars. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a reasonable exposure percentage for a single position?
A: Most financial advisors recommend keeping individual position exposure below 5-10% of the total portfolio to maintain proper diversification.

Q2: How often should I calculate my exposure percentages?
A: It's recommended to calculate exposure percentages regularly, especially after significant market movements or when making new investments.

Q3: Should I include cash in my portfolio total?
A: Yes, cash should be included in the total portfolio value as it represents part of your overall investment assets.

Q4: What if my exposure percentage is too high?
A: If a position represents too large a percentage of your portfolio, consider rebalancing by selling some of the position or adding other investments to increase diversification.

Q5: Does this calculation work for both long and short positions?
A: For short positions, the calculation should be based on the absolute value of the position size relative to the total portfolio value.