Liquidity is how easily you can sell without moving the price. In a busy share it's easy; in a small or thinly traded one, a sell order can push the price down, and the bid/ask spread — the gap between the prices to buy and to sell — widens when markets are stressed, just when people most want out.
Funds can run short of liquidity too. A fund holding things that are slow to sell, such as commercial property, can impose fund gating or a suspension: it limits or stops withdrawals so it isn't forced to sell at fire-sale prices. Several UK property funds suspended dealing after the 2016 referendum and again in 2020, holding investors' money for months. The app shows a price, not whether you could sell at it, and a quoted price only means something if there's a buyer.
Liquidity tends to disappear when everyone needs it at once.
Educational content only. It is not personal financial advice.