One of the most important issues to investors, especially those in or near retired years is: liquidity.
People want to be able to access their money, whenever they feel the need without the risk of fees or restrictions that limit the amount of money that can be retrieved. For seniors this can be especially critical in the event of a health emergency or financial crisis where a substantial amount of money is needed in a relatively short period of time.
With that in mind, a story on CNBC caught our eye with the headline:
El-ERIAN WARNING: “BIG NEGATIVE SHOCK” CAN SPUR LIQUIDITY CRISIS
What does this mean?
Mohamed El-Erian is chief economic adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-chief investment officer. He serves as chair of the President’s Global Development Council, and is a contributing editor to the Financial Times.
He told CNBC that:
“A big negative shock could cause major volatility in areas newly exposed to risk. The risk has migrated from banks to non-banks, and that is going to be an issue. I think the biggest risk, if you ask me what happens if we get a big negative shock, is liquidity. ETFs promise liquidity at reasonable prices. It’s not clear that some of the ETFs in the high-yield space, for example, can actually provide that.”
Liquidity refers to the volume and pace at which assets or equities can be bought or sold in the market without a change in price. Exchange-traded funds, or ETFs, offer liquidity, but El-Erian says that they could be at risk if a major shock hits the stock market.
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