How to get some compensation for "liquidity risk"?
Private assets (private real estate, private equity, private credit) have been mentioned. Some types of publicly traded debt (high yield bonds, distressed bonds, emerging market bonds, structured products (e.g. CDO, ABS, MBS), possibly long term bonds) and publicly traded stocks (microcap stocks, some emerging market stocks) can have liquidity risk. Hedge funds are another possibility; the liquidity risk doesn't necessarily come from the underlying assets, but instead from the structure of a hedge fund.
Although not commonly included, CDs can have liquidity risk. And investing in tax advantaged accounts can have liquidity risk.
I'm a DIY investor, whose background in finance is that of a hobbyist. The only one of the above that I'm confident that I'll get compensation for liquidity risk is tax advantaged accounts. I am also confident that I'm won't get compensation for the liquidity risk of hedge funds.
Private assets (private real estate, private equity, private credit) have been mentioned. Some types of publicly traded debt (high yield bonds, distressed bonds, emerging market bonds, structured products (e.g. CDO, ABS, MBS), possibly long term bonds) and publicly traded stocks (microcap stocks, some emerging market stocks) can have liquidity risk. Hedge funds are another possibility; the liquidity risk doesn't necessarily come from the underlying assets, but instead from the structure of a hedge fund.
Although not commonly included, CDs can have liquidity risk. And investing in tax advantaged accounts can have liquidity risk.
I'm a DIY investor, whose background in finance is that of a hobbyist. The only one of the above that I'm confident that I'll get compensation for liquidity risk is tax advantaged accounts. I am also confident that I'm won't get compensation for the liquidity risk of hedge funds.
Statistics: Posted by Park — Sun Aug 31, 2025 9:40 am — Replies 29 — Views 3459