← Back to the glossary
Glossary entry · Trade-offs
Liquidity
Definition
A measure of how easily an asset can be sold for its fair price, on short notice. Cash is perfectly liquid; a global ETF is highly liquid; a flat is famously illiquid — you can't sell it tomorrow at full price.
Example
You can sell an S&P 500 ETF in seconds at the market price. Selling a flat fast usually means accepting 10-20% below market.
Related
Trade-offs
Risk
The chance that an investment loses value — and how much it could lose.
Read →Volatility
How wildly an investment's price moves up and down. High volatility = bigger swings.
Read →Diversification
Spreading money across many different things so no single one can sink you.
Read →Bull & bear market
Long stretches of rising prices (bull) or falling prices (bear). Both end, eventually.
Read →