Are ETFs liquid assets?
Are ETFs considered liquid assets by your standards?
ETFs are fairly liquid. You can sell them as a market order and generally they will be sold right away. It then takes three business days for the cash to settle in your account from the transaction. That is much faster than selling a house, car, or Fabrege Egg (not so liquid investments).
At the end of 2016, there were 4,779 ETFs. The most widely traded ETFs such as XLF, SPY, EEM, QQQ, and EFA would certainly be considered liquid from the standpoint of trading, but even though they could be sold and settled into cash within three trading days they would not be considered liquid assets. Indeed, although open-end mutual funds settle into cash in only one day, they too would not be considered liquid assets. Neither would be shown together with cash and cash equivalents on a balance sheet.
Yes, ETFs are considered liquid assets, but you also should take into consideration what type of account they are in. An individual taxable account would have no early withdrawal penalty, but a retirement account would. ETFs are much more liquid than mutual funds and are a great choice for an investment portfolio.
The answer isn't that simple. It really depends on the ETF. For example, SPY, an ETF that tracks the S&P 500 Index is extremely liquid. On the other hand, there are some very specific, small ETFs that will have significantly less liquidity. To figure out which ETFs are more liquid, you should take a look at the size of the ETF, the bid-ask spread, and the investment objective of the ETF. Typically, the more liquid the ETF, the tighter the bid-ask spread, and the more broad based the ETF, the more liquid it is.
ETF's would be considered a liquid asset in teh sense that they can be sold on the exchange at any time, for the most part. Like any stock some may be more liquid than others, so I would check on things like average daily volume. If there isn't much volume, a sell order could cause the ETF to drop in price as you try to sell it. Of course, even though it can be sold at any time, there is the possibility that when you need to sell that the value may be less than the amount you invested. THe possibility of loss would lead many to say a particular ETF is not that liquid. This would depend on volatility and market conditions.