When you compare two investments, two figures spontaneously come to mind: the expected return and the risk of loss. A third one is missing, and it is the one that hurts most when it has been overlooked: liquidity. Two vehicles may post the same annual performance, but if one can be sold within a few hours and the other takes several months, you are not holding the same asset at all. The question never arises as long as everything is going well. It becomes central the day a project speeds up, an opportunity arises, or you simply wish to rebalance your allocation. This guide gives you a method: understanding what liquidity actually covers, mapping the profile of each asset class, grasping how a secondary market works, and calculating what an early exit really costs.
Investment liquidity: understanding the Secondary Market and early exit
What is the liquidity of an investment?
An investment's liquidity measures your ability to turn it into available cash, quickly, and without a major concession on price.
The Autorité des marchés financiers (AMF) even provides an operational definition: a financial asset is liquid when there is a secondary market allowing it to be bought or sold quickly at a price close to the quoted price.
Keep this wording in mind, because it contains the essentials: liquidity is not an intrinsic property of your investment, it is a property of the market on which it is traded.
A large CAC 40 stock is not liquid “by nature”; it is liquid because thousands of buyers and sellers show up on the other side every day. The day those buyers become scarce, the security ceases to be liquid.
The three dimensions: time, discount, certainty
Time.
How much time passes between your decision to sell and the funds actually being credited to your account? A few seconds for an ETF, a few days for a money market fund, several months for an apartment.
The discount.
What price sacrifice must you accept to find a buyer quickly? The AMF puts it plainly: when illiquidity risk is high, a seller in a hurry may be forced to sell their securities at a lower price in order to find a buyer.
Certainty.
Is there always someone on the other side? This is the most overlooked dimension, and the only one that really matters in times of stress: a market can be fluid for three years and shut down in three weeks!
An investment is only truly liquid if all three boxes are checked at the same time. Two out of three is what is called a semi-liquid asset, and it is better to know that before signing, because it is an entirely different matter!
Liquidity and safety: two notions not to be confused
Safety refers to the absence of risk of capital loss. Liquidity refers to availability.
The two vary independently, and all four combinations exist: the Livret A is safe and liquid, a large-cap stock is liquid but volatile, a compte à terme is safe but locked up, a collectible is neither one nor the other.
Be careful, because the confusion is costly in one specific direction: believing that a low-risk investment is necessarily available. Really? A fonds en euros cannot lose value, but its redemption takes weeks, and the loi Sapin 2 authorizes the Haut Conseil de stabilité financière to temporarily suspend redemptions in the event of a serious threat to the financial system. Do you understand how it works?
Why liquidity matters as much as yield
The illiquidity premium: what the market pays you for waiting
A fairly robust rule governs the markets: at comparable credit risk, an investment you cannot exit pays more than one that is available.
This gap has a name, the illiquidity premium. It is the compensation the issuer pays you for tying up your money, and it is precisely what explains why a livret réglementé, a two-year compte à terme and a fourteen-month business loan do not offer the same rates.
This premium is neither a gift nor an anomaly: it is a trade-off that you either accept consciously or endure.
The right question is therefore not « should illiquid investments be avoided? », but « what share of my assets can I tie up, and am I being properly paid to do so? » and this is in fact the main driver of alternative investments, whose additional yield primarily compensates for a duration constraint.
The real cost of a forced exit
Let's imagine: you invest €20,000 in a five-year product paying 8%, expecting not to touch it. Fine. Fourteen months later, an unforeseen need forces you to recover the funds.
Three scenarios arise depending on the product: you exit with no fees, which is rare; you exit with a 5% to 10% discount that wipes out fourteen months of interest; or you do not exit at all and finance your need with a consumer loan.
In the last two cases, the stated yield never existed for you.
Hence this simple principle: liquidity is assessed before investing, not when the need arises. At that point, you no longer have choices, only costs.
The liquidity profile of the main asset classes
The table below summarizes the orders of magnitude to keep in mind.
Note : the timeframes apply under normal market conditions, excluding periods of stress or high volatility.
| Asset class | Usual exit timeframe | Exit mechanism | Exit cost | Recommended horizon |
|---|---|---|---|---|
| Livrets réglementés | Immediate | Direct withdrawal | None | Not applicable |
| Money market funds | 1 to 3 business days | Redemption of units | Negligible | 3 to 12 months |
| Comptes à terme | Immediate to 32 days | Redemption with the bank | Loss of all or part of the interest | 3 months to 5 years |
| Listed stocks and ETFs | A few seconds | Organized market (stock exchange) | Spread + brokerage fees | 5 years and more |
| Direct bond holdings | A few days | Over-the-counter market | High spread on small positions | Until maturity |
| Assurance-vie (fonds euros) | 2 weeks to 2 months | Redemption from the insurer | Taxation, possible suspension (Sapin 2) | 8 years and more |
| SCPI | Weeks to several months | Withdrawal or secondary market | Unamortized subscription fees, discount | 8 to 10 years |
| Crowdlending to businesses | Maturity (9 to 14 months), before term if secondary market | The platform's marketplace | Discount + seller fees | Loan term |
| Real estate crowdfunding | Maturity, often extendable | Rarely a secondary market | Not applicable | 12 to 36 months |
| Private equity | 7 to 10 years | Collective exit (sale, IPO) | Significant discount on the secondary market | 8 to 10 years |
| Direct rental real estate | 3 to 9 months | Private sale agreement | Agency, notary, capital gains | 10 years or more |
| Physical gold | 1 to a few days | Buyback by a dealer | Bid-ask spread of 3% to 8% | Long term |
| Collectibles | Several months | Auction or private sale | Commissions of 15% to 30% | Very long term |
There are two ways to read this table.
The first: the ranking follows fairly closely the level of expected return, as the illiquidity premium requires.
The second, more useful one: the “exit mechanism” column should be read first. An investment whose exit relies on an organized, deep market behaves nothing like an investment whose exit depends on a single counterparty.
This criterion also, and above all, explains why not all investments generating monthly income are equivalent: some pay regular flows while tying up capital for a long period.
False friends: investments considered liquid that are no longer so under stress
Three categories warrant particular attention, because they are perceived as more available than they actually are.
SCPI
Long regarded as easy to resell, they showed their true nature during the downturn in the real estate market : liquidity depends entirely on the balance between subscribers and sellers. When too many holders want to exit at the same time, redemption requests pile up and the wait is counted in months.
Management companies do not, moreover, guarantee the redemption of units. Ask yourself why!
Bond funds
They are bought and sold within a few days, but their underlying assets are sometimes difficult to trade. In periods of stress, the gap between the liquidity promised to the holder and that of the underlying portfolio becomes a risk in its own right.
Assurance-vie
The contract is available as a matter of law, but the insurer is legally allowed two months to pay out a surrender, and the Sapin 2 mechanism allows exits to be suspended in the event of a systemic crisis. Over a normal horizon, there is no cause for concern. As an emergency reserve, it is not the right tool.
The secondary market: how to exit before maturity
Primary market, secondary market: the difference in one minute
On the primary market, you subscribe at the time of issuance: you buy a share during an initial public offering, you fund a loan when it goes live, you subscribe to SCPI units. The money goes to the issuer.
On the secondary market, you buy from another investor who wants to exit. The money goes to the seller, not to the issuer, and it is this second tier that creates liquidity: without it, your only way out is the contractual maturity.
Three forms of secondary market
The organized market
Euronext, for example: a centralized order book, continuously displayed prices, a clearing house. This is the most liquid and most transparent form. You can measure the liquidity of a listed stock by consulting its order book, which shows the quantities available for purchase and sale.
Over-the-counter
You find a counterparty yourself, or an intermediary finds one for you. This is the regime for real estate, unlisted company shares and a large part of the bond market. Timeframes lengthen, prices are negotiated case by case.
The platform marketplace
An intermediate model, which appeared with crowdfunding: the platform internally organizes the exchange between its own investors. Neither a regulated market nor pure over-the-counter.
The case of crowdlending: transferring a claim before its term
The lending to businesses is structurally illiquid: you are committed until repayment and the borrower has no obligation to repay you early.
It is precisely to lift this constraint that several platforms have opened an internal marketplace. Maclear launched its own in May 2024 in order to offer an early exit solution on loans with a term of nine to fourteen months: investors can transfer all or part of a claim on an already funded project, at a price they set themselves!
The principle is simple, but its concrete conditions: discount, fees, lock-up period, allocation of accrued interest, deserve to be read in detail before counting on it. They are covered in our guide to the P2P lending secondary market and in the user guide to the Maclear marketplace.
One point deserves to be stated clearly: a secondary market is an option, never a guarantee. It improves an investment's liquidity profile; it does not turn it into a liquid investment. On that basis, it is among the risks to examine before investing.
Discount, fees, delays: the true cost of an early exit
The discount, the price of speed
On an investor-to-investor marketplace, you generally set your own selling price : at par, with a discount to exit quickly, or with a premium if your position is in demand.
The discount is the speed lever: the more hurried you are, the deeper you make it.
Transfer fees
On top of the discount come the fees charged by the infrastructure: brokerage commission on the stock exchange, seller fees on a platform marketplace, on the order of 2.5% of the amount transferred on peer-to-peer lending secondary markets, agency fees and transfer duties in real estate. Key point: they apply to the amount sold, not to your gain.
Let's take a numerical example.
You hold a receivable of €1,000 paying 13% per year over twelve months. In the seventh month, you decide to exit. You have received approximately €75.80 in interest. You sell your position at a 2% discount (i.e. €980) and pay 2.5% in seller fees (€24.50). Your net gain falls to €31.30 over seven months, i.e. an annualized return of approximately 5.4%.
You have not lost money, but you have left two thirds of your return on the table ! An early exit is not a disaster; it is simply a scenario whose cost must be known in advance.
Adverse selection: why not everything sells at the same price
A final, less intuitive mechanism: on a secondary market, the buyer knows that you are selling, but not always why. They therefore apply a precautionary discount, which is all the larger if the position shows a payment delay or is approaching a sensitive maturity date.
The result: sound positions sell at or near par, while impaired positions only find a buyer at the cost of a substantial concession.
Liquidity is therefore not uniform within a single portfolio. It is at its highest where you need it least, and it slips away precisely when you are seeking to exit a position that is deteriorating.
What determines the actual liquidity of a secondary market
A secondary market rarely exists on an all-or-nothing basis: its quality varies, and it can be measured. Five factors really matter.
Depth : the number of active buyers at a given moment.
The volume traded each month, relative to the platform's total outstanding amount.
The characteristics of the position : age, repayment history, any incidents, remaining term.
The size of the ticket : a small position is placed more quickly than a large one.
The market context : in times of stress, everyone sells at the same time and no one buys.
The six questions to ask before investing
Is there a secondary market, and how long has it been operating?
What volume was traded there last month, in euros and as a share of the outstanding amount?
What fees apply to the seller, and on what basis are they calculated?
Is there a lock-up period after subscription?
Can a position with a late payment be transferred?
How is accrued interest allocated between the seller and the buyer?
A platform that publishes this information of its own accord tells you more about its soundness than any rate displayed on its home page.
Building your portfolio's liquidity profile
The three-pocket method
Pocket 1: the precautionary reserve. Three to six months of ordinary expenses in vehicles available without delay or conditions. This pocket is not meant to generate returns, but to avoid having to liquidate the others at the wrong time. It is your first line of defense against forced exits.
Pocket 2: projects with a one- to five-year horizon. Sums allocated to an identified objective. The priority here is capital preservation and availability, not maximum return: this is the domain of short-term cash investments.
Bucket 3: the long term and the illiquid. It is here, and only here, that the illiquidity premium is captured: equities, real estate, private equity, crowdlending.
The entry criterion is simple: you must be able to forget this money until the scheduled maturity. It is also this bucket that carries the protection of your savings against inflation over time.
The maturity ladder: scheduling your liquidity rather than negotiating it
On fixed-term investments, there is an elegant alternative to the secondary market: not needing it.
By spreading your commitments across staggered maturities, for example one sixth of the capital maturing each quarter, you create a stream of regular repayments that covers most unforeseen needs. This scheduled liquidity does not depend on any counterparty and costs no discount; it merely requires finely managing thetrade-off between loan duration and yield.
It is, in practice, the most reliable way to make available a portfolio made up of assets that are not.
What share of illiquid assets can you afford?
There is no universal answer, but three questions frame the decision: is your precautionary bucket complete? Are your income streams stable and predictable? Do you have a known financial milestone in the next five years, a purchase, children's education, transmission of wealth?
If the three answers are favorable, a significant share of illiquid assets is perfectly consistent.
Otherwise, the illiquidity premium becomes a trap: you will statistically be forced to exit at the worst moment, and the discount will consume several years of outperformance.
The five mistakes to avoid
Making the secondary market your plan A. It is designed as a relief valve, not as a current account. An investment you plan to exit before maturity is simply not the right investment.
Confusing stated liquidity with liquidity in times of stress. The two never coincide, and it is precisely in stressed conditions that the gap is paid for.
Overlooking the tax treatment of the exit. A sale triggers taxation of the gains: the net amount actually recovered is not the amount sold. If you are a French tax resident, see our guide to the taxation of crowdlending.
Underestimating your emergency savings. This is the leading cause of forced exits, and it is entirely avoidable.
Judging an investment solely on its advertised return. A return you will not achieve because you exit before maturity is not a return: it is an assumption.
Frequently asked questions
Which investment is the most liquid?
Regulated savings accounts, by far: immediate withdrawal, with no fees or conditions. Money market funds come just behind, with a delay of one to three business days. The trade-off is well known: they are also the lowest-paying products.
Does a liquid investment necessarily pay less?
At comparable risk, yes, because of the illiquidity premium. Beware of the reverse reasoning, however: illiquidity alone does not create return. An investment that is both locked up and poorly paid does exist. Always check that the rate differential genuinely compensates for the lock-up required.
Can you exit a crowdlending investment before maturity?
Only if the platform offers a Secondary Market, and under the conditions it sets: discount, seller fees, possible lock-up period. Without a Secondary Market, the funds are tied up until repayment, including if the borrower is late.
What is a discount on the Secondary Market?
It is the reduction granted by the seller relative to the nominal value of their position, in order to find a buyer more quickly. Selling a €1,000 claim at €980 amounts to applying a discount of 2%. The larger the discount, the faster the sale, and the lower your effective return.
Are SCPI liquid?
No. They are long-term real estate investments, with a recommended holding period generally exceeding eight years. Reselling goes through a withdrawal (variable-capital SCPI) or through a secondary market (fixed capital), and in both cases the exit is neither immediate nor guaranteed.
What share of your assets should be kept in liquid investments?
At a minimum three to six months of everyday expenses, plus any sum earmarked for a project less than five years away. Beyond this base, the allocation depends on the stability of your income and your time horizon: the more predictable they are, the more you can tie up.
Key takeaways
Liquidity is the third dimension of an investment, alongside return and risk. It is measured in time, in discount and in the certainty of finding a buyer.
It is not a property of your asset, but of the market on which it is traded. Read the exit mechanism before the advertised rate.
A Secondary Market is an exit option, not a liquidity guarantee. It has a cost: discount plus transfer fees.
The illiquidity premium compensates for tying up your capital. It can only be captured on the long-term portion of your portfolio.
A properly sized emergency savings buffer and a well-built maturity ladder are worth more than any Secondary Market.
Maclear AG is a Swiss peer-to-peer (P2P) lending and crowdlending platform, headquartered in Switzerland. The company acts as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in accordance with Swiss financial regulations, particularly regarding AML, KYC, and GDPR. Maclear provides individual and qualified investors access to carefully selected business loan opportunities, with integrated risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.