When a stock is sold for a profit, it’s the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below net cost the difference is a capital loss.
Term of the Minute
- Liquidity Risk
Liquidity is a measure of how quickly an investment can be sold for cash at a fair market price. If a fund can’t sell an investment quickly, it may lose money or make a lower profit, especially if it has to meet a large number of redemption requests. In general, investments in smaller companies, smaller markets or certain sectors of the economy tend to be less liquid than other types of investments. The less liquid an investment, the more its value tends to fluctuate.