Market Liquidity Matters:Is liquidity is good for investors in current scenario?

Liquidity is the most important factor in Stock trading. If the Stock Market need to function efficiently there must be adequate liquidity. In NYSE they have the specialists, the broker dealer, the pool operator and the curb trader all of whom can provide the liquidity. If one fails there are the others to provide liquidity. First the broker dealer try to sell through others, if not possible he goes to the specialist or to the pool operator usually run by the company who owns the stock who does buying and selling to maintain a price band not for profits.

Dear Jyoti,

I agree to the point that Liquidity is very important for the investor.

In the recent market volatility we have seen that the one who have been fully invested have not made money, because one cannot buy at dips or any other opportunities. Be it  any kind of investor he must have enough liquidity of his investments. And in a market condition like this when there is uncertainty due to elections one must adopt a wait and invest strategy rather then being fully invested.

I believe that whatever is the investment if u are sitting on 20% or more profits , one must not be more ambitious and one must book the profits and then wait for opportunities to invest again, as 20% in such situations is not a bad return.

Thus, liquidity has become an integral part in all the discussions of Investments.

Liquidity is very important for investor, and its only enable a investor to safeguards from market  vulnerability.

The liquidity is a matter of your investment strategy and investment preferences. If you are a private equity investor or long-term one searching for the prospective companies, to invest your money in their business for a long time frame (years), then liquidity will not matter for you, to a reasonable extent. But some investment programs and financial solutions rely heavily on the liquidity of financial markets and instruments. Strictly speaking, the company will not be able to apply for a program, if the market is illiquid. Basically, I would say that market liquidity matters for short-term investments, active trading ops and for those investment programs that rely heavily on the market and company liquidity. For long-term and value investments it does not play the prime role in selecting a business to invest. It may complicate the company valuation to a certain extent, but its does not make it impossible. Finally, investment program may be used by the company in order to create the liquid market for its shares. In the current scenario I would say that the liquidity does matter in order to restore the general flow of market activities. So, I think that the relevant financial solutions should be employed to restore the constant flow of events. Anyway, it is always better to have a liquid market, then a frozen one.

The liquidity is the real measure of your Capability, except Inflationary adjustments. This points gets validated by seeing the dwindling ESOPs value with Executives of Major Companies. So, Cash in Hand or liquidity is not only going to enable you handle the short term risk but also that it will give you confidence of ownership and chances of reinvestment.