Five liquidity golden rules for owning small caps

Capacity awareness and position sizing vital

The issue of liquidity in open-ended funds has hit the headlines in recent weeks - with much of the spotlight focusing on small and micro-cap stocks.

While stocks at the smaller end of the equity market often exhibit lower levels of liquidity than larger peers, it must be remembered small and micro-cap stocks are less liquid - not illiquid. Nevertheless, managing liquidity in funds is crucial for delivering long-term performance and meeting investor needs. Liquidity matters at a stock level, for building and exiting positions, as well as delivering target returns. More importantly, liquidity in open-ended funds allows investors to deal on a daily basis. Miton duo increases position in UK microcaps in anticipation of market rebound ...