Liquidity Definition
Learn the definition of liquidity and other ETF terminology from the etf.com glossary.
Learn more about Liquidity
Liquidity in ETFs is the lifeblood of efficient markets, representing the ease with which investors can buy or sell shares without significantly impacting the asset's price. Highly liquid ETFs exhibit tight bid-ask spreads and ample trading volume, offering investors a cost-effective gateway to market participation. Beyond the basic concept of tradability, liquidity ensures that investors can swiftly execute trades, contributing to price stability and minimizing the impact of transaction costs. In essence, liquidity transforms ETFs into accessible, dynamic instruments, enhancing their attractiveness for investors seeking efficiency, flexibility, and the ability to swiftly navigate changing market conditions.
