LIQUID DEFINITION FULL

As noted above, you may end up selling a security like stock for less than you paid for it. You usually receive cash from the sale within a few days.

Stocks. Equities may be sold on stock exchanges almost instantly, and publicly traded stocks are considered very liquid.

Like any security, you may end up selling bonds for less than you paid for them. But the secondary market for trading bonds is vast, meaning that many types of bonds are relatively liquid investments.

Bonds. Some investors buy bonds and hold them to their maturity date.

No-penalty CDs are an exception here, and they earn lower APYs. To access the money held in a CD before its maturity date, you may have to pay a penalty, typically a few months of interest. CDs can earn you higher APYs than checking or savings accounts, but they also come with tougher withdrawal restrictions. As a consequence, they can instantly be sold for cash on the secondary market if you need their value before they mature.

LIQUID DEFINITION FULL

T-bills and T-bonds are highly stable-and highly liquid-investments, backed by the full faith and credit of the United States government. Besides holding physical currency and ATM withdrawals, cash can be accessed via your checking account and peer-to-peer payment apps. Cash. Cash is the ultimate liquid asset.While assets are valuable possessions that can be converted into cash, not all of your assets can be sold for cash right now, or without taking a loss on the sale. Liquid assets are assets that can easily be exchanged for cash. This doesn’t mean that you will never receive cash for them, only that it can be more challenging to value assets like this and then turn them into cash. To protect against inflation and save for long-term financial goals, you’ll probably want to sacrifice some liquidity and lock assets into investments that grow your wealth over time, like investment securities or real estate.īut assets like real estate, as well as art and jewelry, may be considered highly or even exclusively illiquid. Completely liquid assets, like cash, may even fall victim to inflation, the gradual decrease in purchasing power over time. In general, the more liquid an asset is, the less its value will increase over time. But it’s important to recognize that liquidity and holding liquid assets comes at a cost. Liquidity is important because owning liquid assets allows you to pay for basic living expenses and handle emergencies when they arise. Cash in a bank account or credit union account can be accessed quickly and easily, via a bank transfer or an ATM withdrawal.

And cash is generally considered the most liquid asset. The easier it is to convert an asset into cash, the more liquid it is. Liquidity describes your ability to exchange an asset for cash.

Liquid definition