Definition
How easily you can convert an asset to cash without affecting its price. Cash is the most liquid asset, while real estate is less so.
What to consider
- Maintain a balance between investments and easily accessible cash.
- Keep some funds liquid for unexpected expenses.
- Review your asset mix to ensure you’re not overcommitted.
Real world scenarios
- Raina keeps part of her savings in a liquid money market account for emergencies. This ensures fast access to cash if needed.
- Investing in real estate can offer long-term gains but lacks the day-to-day liquidity of stocks or bonds.
- Balancing some liquid assets with more illiquid ones helps Christine manage both short-term needs and long-term growth.
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