ILLIQUIDITY-VOLATILITY

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7 Illiquidity and Market Volatility are the “enemies” of short term investors, but the “friends” of long term investors

If you have a short investment time horizon, you do not want much volatility as you have little appetite for a reduction in portfolio value. However it is volatility that generates returns in the longer term, and thus long term investors should embrace it. It is a similar situation as regards illiquidity.