The case for buying illiquid stocks

Studies show that small cap illiquid stocks outperform the big blue chips. Here’s how to invest in them safely. Most investors fawn over the big banks, Westfield and Woolies – great companies, dominant positions and highly liquid stocks that you can buy or sell in a heartbeat. The trouble is that everyone else likes these qualities too and so popular stocks often come with hefty price tags, leading to mediocre returns. But if you’re willing to buy the forgotten minnows of the stock market, the opposite principle may apply. A 2012 study assessed US mutual fund returns from 1995 to 2009. Funds were classified according to their value or growth orientation, as well as the liquidity of their stock holdings. Funds that held the least liquid 20% of stocks returned an extra 2.65% a year compared to funds holding the most liquid quintile.... Continue reading: (VIEW LINK)