What is liquidity?
Liquidity means how easily an asset or investment can be converted into cash. If an asset can be easily bought or sold in the market at a price close to its true value, it’s considered liquid.
Which assets are liquid, and which ones are not?
Cash is of course the most liquid asset. Some other examples of liquid assets are stocks, bonds and gold. On the other hand, assets like real estate, art work and collectibles are illiquid.
What should be the proportion of liquid and illiquid assets in my investment portfolio?
Liquidity is only one of the factors you should consider while making an investment. But in general, if you don’t need the money back for a long time, you can invest in illiquid assets like real estate. If you need the money sooner, the investment should be in liquid assets such as Certificate of Deposits or CDs.
Remember, your emergency fund should always be held as cash or invested in very liquid assets like Money Market Funds.
Podcast: What is Liquidity?
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
All you need to know about liquidity: What is Liquidity, which assets are liquid and which ones are not, what should be the proportion of liquid and illiquid assets in your investment portfolio, and more.
Show notes and transcript at: https://www.easypeasyfinance.com/what-is-liquidity-of-assets-and-investments/