DEFINITION of 'Illiquid'

The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset. The lack of ready buyers also leads to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity.


Some examples of inherently illiquid assets include houses, cars, antiques, private company interests and some types of debt instruments. On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, funds, bonds and commodities are very liquid, and can be sold instantaneously during regular market hours at fair market price.

Illiquid securities carry higher risks than liquid ones; this becomes especially true during times of market turmoil when the ratio of buyers to sellers may be thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing a lot of money.

  1. Liquidity

    The degree to which an asset or security can be quickly bought ...
  2. Corporate Undertaker

    An informal term for liquidator. As the name implies, a corporate ...
  3. Thinly Traded

    An asset that cannot easily be sold or exchanged for cash without ...
  4. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  5. Market Versus Quote - MVQ

    A comparison between the last price at which a security traded ...
  6. No Quote

    A stock that is inactive or not currently being traded. A no-quote ...
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: SPDR Morgan Stanley Technology

    Find out about the SPDR Morgan Stanley exchange-traded fund, and learn detailed information about its characteristics, suitability and recommendations.
  2. Investing Basics

    Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio risk.
  3. Home & Auto

    Key Reasons To Invest In Real Estate

    There has been a lot of negativity over the real estate sector since 2008. Here are the reasons why you should be investing in it.
  4. Options & Futures

    Understanding Financial Liquidity

    Understanding how this measure works in the market can help keep your finances afloat.
  5. Bonds & Fixed Income

    Structured Notes: Buyer Beware!

    At first glance, this product looks like the answer to investors' prayers. In reality, it's just too good to be true.
  6. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  7. Savings

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  8. Bonds & Fixed Income

    Equity Valuation In Good Times And Bad

    Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value.
  9. Markets

    Liquidity Measurement Ratios

    Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle.
  10. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  1. Can mutual funds invest in private equity?

    Mutual funds can invest in private equity indirectly by buying shares of publicly listed private equity companies, such as ... Read Full Answer >>
  2. What factors might make a private placement a risky investment?

    Factors that make private placements risky investments include the potential loss of capital, a possibility of fraud associated ... Read Full Answer >>
  3. What investments have been the poorest historical performers?

    Financial investments that offer low potential gains are technically the worst for investors. These investments are usually ... Read Full Answer >>
  4. Can investments be consumed immediately?

    Consumption refers to the value of a good or service that has been bought. This value is meaningful to the individual who ... Read Full Answer >>
  5. How do I measure option liquidity?

    An option is a financial instrument that gives the holder the right to purchase shares in a company at a certain set price ... Read Full Answer >>
  6. How do I buy an over-the-counter stock?

    The process of purchasing over-the-counter (OTC) stocks is different than purchasing stock from companies on the NYSE and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center