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The spread as a hidden fee
When selling a bond, you rarely receive a "fair" market price. The difference between buying and selling (the spread) is an invisible tax on your liquidity, which is often ignored when calculating yield.
If your money sits in a deposit earning interest, in bonds, you pay the market maker for the opportunity to exit. The lower the liquidity of a specific issue, the wider this spread, and the more expected profit you lose when trying to withdraw capital early.
The lower the liquidity of an issue, the more expensive your every move on the exchange becomes.
#investing #liquidity
