THE IMPORTANCE OF LIQUIDITY
Today I want to take a few lines to revisit a topic we’ve already discussed in the past, but one that I believe deserves to be reviewed periodically: liquidity.
Over the past two months, we have made several purchases. During market declines—both at a general level and on individual stocks—we have always been ready to act promptly. This didn’t happen by chance, but for a very specific reason: we had liquidity available.
And this is exactly the key point.
Being fully invested may seem, at first glance, the most “efficient” choice. In reality, it means giving up the ability to take advantage of opportunities when they arise. Markets do not move in a straight line: they alternate between phases of enthusiasm and periods of correction. And it is precisely during these moments that the most interesting opportunities to allocate capital are created.
Having a portion of liquidity allows you not to remain a spectator, but to take action.
At the moment, we have approximately $5,500 in liquidity. It’s important to remember that when you start copying or make new deposits, the percentage of liquidity is automatically replicated in your copy as well. This ensures consistency and alignment between how I manage my capital and how your copy is managed.
There is also another aspect that is often underestimated, but fundamental: the psychological one.
During market downturns, having liquidity completely changes your perspective. A decline is no longer seen as a problem, but as an opportunity. You move from a passive position—characterized by waiting and concern—to an active one, where you can act with clarity. On the other hand, being fully invested exposes you to a different risk: being forced to sell at a loss in order to generate liquidity and take advantage of new opportunities.
In other words, liquidity is not just an operational tool. It is also a tool for emotional management.
Over time, liquidity can be rebuilt in different ways: through cash flows generated by dividends, through regular new deposits, or through active portfolio management—reducing positions that have already expressed much of their potential or that no longer meet our expectations.
This leads to an important question: how should this liquidity be used?
A simple approach is to divide it into multiple tranches and invest it progressively during market declines. For example, assuming a total of $15,000, one could invest a first portion after a 10% market drop, a second at 15%, and the remaining at 20%. This helps avoid impulsive decisions and spreads risk over time.
At this stage, following the recent market recovery, the focus shifts to rebuilding liquidity. We are doing this mainly through dividend flows and regular contributions.
Personally, I consider a liquidity level of around 15% to be a good balance. It is enough to capture opportunities without giving up market exposure.
Finally, it’s worth remembering that liquidity is not necessarily unproductive. Cash can also generate returns today, contributing to the overall growth of the portfolio.
I hope this review has been helpful, especially in understanding that liquidity is not “idle capital,” but a strategic tool in every sense.
Have a great day everyone
@LucaMulargiu... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
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Mon May 11 2026 06:03:23 GMT+0000 (Coordinated Universal Time)
