Liquidity
Liquidity is how quickly you can sell an asset for close to its current market price.
Why this matters
Low-liquidity assets can force you to accept worse prices when you need cash quickly.
Simple example
A large ETF is usually more liquid than a thinly traded micro-cap stock.
Common mistakes
- Assuming every listed asset can be sold instantly at fair value.
- Holding only illiquid assets with no cash buffer.
- Ignoring bid-ask spreads in low-volume markets.