Morning Dan"With all due respect wouldn't you agree that if...

Morning Dan

"With all due respect wouldn't you agree that if investors are after liquidity the stock market is perhaps the wrong investment for them?"

I guess that depends on what 'liquidity' means to each investor.

For myself - I think that market is the essence / epitome of liquidity. I can gain access to my funds within 3 days. Whereas with real estate it could take 6 - 9 months or even longer to liquidate an investment. I have some realestate investments and I do not even consider them as a readily available source of funds if and when needed. A fixed term deposit also takes time to get out of a bank / financial institution.

And your superannuation account is probably the most illiquid investment because you can not access that until your preservation age. There are some provisions within the regulations to access super under very specific circumstances but a very illiquid investment. 

The reason why small stocks like CGB are almost impossible to put into a margin loan portfolio is because of the lack of liquidity - things like long suspensions and rapid falls in value are common (inherent instability). The LVR on a TLS / BHP share through ANZ is 70 - 75%. Some small caps have an LVR of 20% if you can structure your portfolio correctly.

Liquidity is a very good topic to understand. I suspect some of the gamblers here will not have considered that factor but it looks like you have. 

If you want a good 'rule of thumb' guide to the risk involved in small caps simply download an approved margin loan stock list from whatever platform / service that you use. Banks are very good at assessing risk - in my opinion. I think it is a good resource to use in your risk / reward analysis of any stock. If the bank puts the risk as high (low LVR) then maybe you should as well.

And by the way - it is the same reason why many micro caps go to 'exotic' funding sources to 'keep the lights on' - traditional lenders assess their risk as being too high.

Enjoy your day.