Liquidity Risk
Chapters in this video
- 0:00 What liquidity risk means for your cash
- 1:08 Ivy's nightmare: selling a private partnership
- 2:28 The liquidity spectrum from Treasuries to restricted securities
- 3:24 Open-end versus closed-end fund mechanics
- 4:58 Why alternative investments trap your cash
- 5:54 The restricted securities SEC trap
- 6:33 Rapid-fire exam recap
What this video covers
- What liquidity risk means: the risk of taking a steep price concession to sell an investment quickly
- Why open-end mutual funds rank among the most liquid investments, since investors redeem daily at net asset value (NAV)
- How closed-end funds differ: they trade on exchanges like stocks, so liquidity depends on trading volume
- Why alternative investments (direct participation programs (DPPs), hedge funds, non-traded real estate investment trusts (REITs)) are the most illiquid choices on the exam
- The role of lock-up periods and limited redemption windows in making alternative investments illiquid
- What restricted securities are (unregistered stock or control stock), and why SEC holding-period and volume requirements must be met before selling
- How the exam baits test-takers by pairing open-end mutual funds against alternatives to test whether you know the liquidity difference
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete SIE course in the app is free too, including adaptive practice questions and spaced-repetition flashcards.