Market Basics
Liquidity
How easily an investment can be bought or sold without causing a large price change.
Also called: market liquidity
What it means
Liquidity describes how quickly and easily an asset can be turned into cash at a fair price. A highly liquid investment usually has many buyers and sellers. An illiquid investment may be harder to sell or may require accepting a lower price.
Why it matters
Liquidity affects how flexible an investment is and how much friction there may be when entering or exiting a position.