Navigating liquidity risks for physician investors.
Dr. Anya Sharma, despite her financial success, is heavily invested in a handful of healthcare companies she believes in, including shares of a local biotech firm with a limited public float. Her advisor worries about the potential for significant losses if she needs to liquidate a large portion of these holdings quickly, especially if negative news impacts the market's perception of the biotech sector. The limited availability of shares for public trading makes it difficult to accurately assess the true liquidity risk she faces.
Using Golden Door Asset's Free Float Calculator, Dr. Sharma's advisor can accurately determine the number of shares actually available for public trading for each of her holdings. This reveals that only 35% of the local biotech firm's shares are readily tradable. Analyzing this data alongside Dr. Sharma's total holdings allows the advisor to stress-test her portfolio's performance under different scenarios, quantifying the potential impact of selling large blocks of stock in a low-liquidity environment. With this information, Dr. Sharma understands the need to diversify and gradually reduce her exposure to the biotech firm, allocating funds to more liquid assets.
The Free Float Calculator leverages publicly available data on outstanding shares and insider/institutional ownership to determine the percentage of shares available for trading by the general public. This figure is then incorporated into portfolio risk analysis tools.
$35,000 potential savings by avoiding significant losses from forced sales in a low-liquidity market.
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