when examining the market exposure in a portfolio an investor can also examine holdings by geographic location this may include separating domestic investments from those of foreign economies or further dividing foreign markets by their specific region in the world or as emerging markets 
for example an investor could have a portfolio that is allocated to 50 domestic and 50 foreign stocks if additional exposure separation is desired the foreign holdings may be divided further to show 30 in asian markets and 20 in european markets moreover we can describe the asian segment as allocated 50 to developed and emerging markets apiece investments can also be divided up by the industry or economic sector within which the underlying companies operate using the above hypothetical investor s 80 market exposure to stocks there might be a 30 market exposure to the health care sector 25 exposure to the technology sector 20 to the financial services sector 15 to the defense sector and 10 to the energy sector the portfolio s returns are more influenced by health care stocks than by energy stocks because of the greater market exposure to the former exposure diversification and risk managementthe exposure of a portfolio to particular securities markets or sectors must be considered when determining a portfolio s overall asset allocation since diversification can greatly increase returns while also minimizing losses for instance a portfolio with both stock and bond holdings that includes market exposure to both types of assets typically has less risk than a portfolio with exposure only to stocks in other words diversification in this way reduces market exposure risks this applies to allocating assets across different asset classes or industries using the aforementioned example if the investor wanted to reduce high market exposure to health care because of major changes in the industry brought by new federal regulations selling 50 of those holdings reduces that particular exposure to 15 