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Liquidity, I'm sorry didn't you invest in that company? If you can find a buyer for that percentage, okay cool, but nothing about investing should revolve arou

Liquidity, I'm sorry didn't you invest in that company? If you can find a buyer for that percentage, okay cool, but nothing about investing should revolve around if you need liquidity all of a sudden.

dagw 9y ago
nothing about investing should revolve around if you need liquidity The knowledge that I can get out of my investment any time I want at the current market price makes me much more willing to invest in the first place. If I know that it can take several month to get out of an investment or that I have to sell at a discount to get a fast deal then I'm more likely to sit on more of my money in case I need it quickly.
- Retric 9y ago
  In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal markets would quickly take it's place consider what happens to pre IPO stock.
  - dagw 9y ago
    Even if liquidity in the stock market doesn't matter to you personally, it also allows for others build new 'products' on top of it that you might benefit from. ETFs and Index funds, for example, provide far more benefits to the average investor than access to a liquid stock market. However they wouldn't really exists in their current form (or at the very least be a lot more expensive) without a liquid marked underneath them.
  - matwood 9y ago
    I hope one to one day have enough wealth that it takes months to liquidate my stocks. The number that can’t be liquidated almost instantly is very large. Additionally, IPOs are almost priced incorrrectly, and show the problems with the informal market.
    - Retric 9y ago
      I would not nessisarily say they are priced incorrectly, there is a liquidity premium. Also, post IPO there is often a tiny slice of the company on the market combined with a lot of speculation.
    - wbl 9y ago
      IPO pricing is deliberate on the part of investment banks to reward some customers.
      - cm2187 9y ago
        Actually probably more to ensure that the IPO doesn't fail, i.e. that there is sufficient demand.
  - auxym 9y ago
    Months to years to liquidate stock? For most people? I can't imagine selling a position would have any influence on price until it's a significant percentage of the market cap. The median cap of the Russell 2000 (an american small cap index) is 809 M [0]. Do most people really have multi-million positions in a single small cap company? https://en.wikipedia.org/wiki/Russell_2000_Index https://en.wikipedia.org/wiki/Russell_2000_Index
    - Retric 9y ago
      No not most people. But, if you own 60% of a company it can take a long time to unwind without impacting the price. Further the transion is smooth as selling 1 million in most stocks in a second would change the price. Anyway, my point is simply that trades are the mechanism that changes price. So, you can't expect to sell arbitrary amounts of stock at the current clearing price.
      - dagw 9y ago
        How many people own 60% of a publicly traded company?
        Retric 9y ago
        Worldwide probability less than 20. But again that's just the extreme that demonstrates what's gong on. If you ever watch a stock ticker and calculate the volume of sales needed to change the price it's less than most people assume. +/- a few cents might not seem like much but drops can spiral with relatively small initial sales.
        Retric 9y ago
        PS: While this topic seems to annoy people I suggest you look up 'off-board' trading before dismissing the idea. EX: https://www.wsj.com/articles/SB860538568435594500 https://www.wsj.com/articles/SB860538568435594500 The reality is the current ticker price is only meaningful up to mid sized transactions.
charlesdm 9y ago
You clearly haven't invested much then. Investing in the public markets is different to investing in private equity -- the former is generally highly liquid, the latter illiquid. Illiquid investments need to generate higher returns to make up for the fact they're illiquid, in comparison to liquid ones.

dagw 9y ago

nothing about investing should revolve around if you need liquidity The knowledge that I can get out of my investment any time I want at the current market price makes me much more willing to invest in the first place. If I know that it can take several month to get out of an investment or that I have to sell at a discount to get a fast deal then I'm more likely to sit on more of my money in case I need it quickly.

Retric 9y ago
In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal markets would quickly take it's place consider what happens to pre IPO stock.
- dagw 9y ago
  Even if liquidity in the stock market doesn't matter to you personally, it also allows for others build new 'products' on top of it that you might benefit from. ETFs and Index funds, for example, provide far more benefits to the average investor than access to a liquid stock market. However they wouldn't really exists in their current form (or at the very least be a lot more expensive) without a liquid marked underneath them.
- matwood 9y ago
  I hope one to one day have enough wealth that it takes months to liquidate my stocks. The number that can’t be liquidated almost instantly is very large. Additionally, IPOs are almost priced incorrrectly, and show the problems with the informal market.
  - Retric 9y ago
    I would not nessisarily say they are priced incorrectly, there is a liquidity premium. Also, post IPO there is often a tiny slice of the company on the market combined with a lot of speculation.
  - wbl 9y ago
    IPO pricing is deliberate on the part of investment banks to reward some customers.
    - cm2187 9y ago
      Actually probably more to ensure that the IPO doesn't fail, i.e. that there is sufficient demand.
- auxym 9y ago
  Months to years to liquidate stock? For most people? I can't imagine selling a position would have any influence on price until it's a significant percentage of the market cap. The median cap of the Russell 2000 (an american small cap index) is 809 M [0]. Do most people really have multi-million positions in a single small cap company? https://en.wikipedia.org/wiki/Russell_2000_Index https://en.wikipedia.org/wiki/Russell_2000_Index
  - Retric 9y ago
    No not most people. But, if you own 60% of a company it can take a long time to unwind without impacting the price. Further the transion is smooth as selling 1 million in most stocks in a second would change the price. Anyway, my point is simply that trades are the mechanism that changes price. So, you can't expect to sell arbitrary amounts of stock at the current clearing price.
    - dagw 9y ago
      How many people own 60% of a publicly traded company?
      - Retric 9y ago
        Worldwide probability less than 20. But again that's just the extreme that demonstrates what's gong on. If you ever watch a stock ticker and calculate the volume of sales needed to change the price it's less than most people assume. +/- a few cents might not seem like much but drops can spiral with relatively small initial sales.
        Retric 9y ago
        PS: While this topic seems to annoy people I suggest you look up 'off-board' trading before dismissing the idea. EX: https://www.wsj.com/articles/SB860538568435594500 https://www.wsj.com/articles/SB860538568435594500 The reality is the current ticker price is only meaningful up to mid sized transactions.

charlesdm 9y ago

You clearly haven't invested much then. Investing in the public markets is different to investing in private equity -- the former is generally highly liquid, the latter illiquid. Illiquid investments need to generate higher returns to make up for the fact they're illiquid, in comparison to liquid ones.