These stocks having low trading volumes, and hence, avoidable. One needs to exit these whenever possible.
These stocks having low trading volumes, and hence, avoidable. One needs to exit these whenever possible.
When an asset has low trading volumes and cannot be traded quickly without a significant impact on market price, it exposes you to liquidity risk. This is evident for small companies that have a small free float, or any company in which a significant portion of issued shares are held by promoters, government, strategic partners, etc. and not traded regularly.
Since there are not many buyers in the market you cannot sell stock quickly. You will only be able to sell large quantities at rapidly decreasing prices.
If an asset is carrying liquidity risk without other risks, you should start selling gradually. However, if the asset is exposed to liquidity risk accompanied by other risks too, your risk is compounded. It is better to exit such assets immediately.