Liquidity
Chapters in this video
What this video covers
- Why a client's liquidity need overrides an attractive return, no matter how strong the projected performance
- How open-end mutual funds achieve high liquidity through daily net asset value (NAV) redemption guaranteed by the fund itself
- How exchange-traded funds (ETFs) achieve high liquidity through intraday exchange trading at market price, and why extreme stress can cause price-to-NAV divergence
- Why "trades on an exchange" does not automatically mean highly liquid, using closed-end funds and thin trading volume as the exam trap
- Where closed-end funds and unit investment trusts (UITs) sit on the moderate liquidity middle ground, and the specific friction each faces
- Why hedge funds and private equity (PE) funds impose lock-up periods (often one year or longer) and limited redemption windows, making them unsuitable for near-term cash needs
- How non-traded real estate investment trusts (REITs) differ from publicly traded REITs, and why the underlying asset class does not determine liquidity (the vehicle does)
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete Series 66 course also includes adaptive practice questions and spaced-repetition flashcards.