Liquidity refers to accessibility to cash, or how easy it is to turn an investment into cash. When constructing investment portfolios, many investors overlook the need to plan for liquidity.
This is of particular concern during volatile markets, when asset values can fluctuate. When unexpected losses or disruptions in securities markets impair asset values, investors may find their portfolios insufficiently flexible to meet short-term liquidity needs.
ETFs are increasingly popular vehicles for investors seeking liquidity, diversification and low costs. The following liquidity solution may complement investors’ portfolios by providing a targeted source of liquidity without undue principal volatility, while pursuing short-term income.