g Text Version
Beauty & Self
Books & Music
Food & Wine
Health & Fitness
Hobbies & Crafts
Home & Garden
News & Politics
Religion & Spirituality
Travel & Culture
TV & Movies

Bored? Games!
Take a Quiz
Rate My Photo

Autism Spectrum Disorders
Mental Health
Blogs / Social Networking
Kidney Disease
Today in History

All times in EST

Low Carb: 8:00 PM

Full Schedule
g Investing Site

BellaOnline's Investing Editor


Liquid or Illiquid Assets

One term used in investing is liquidity. Investments are referred to as liquid if they can be easily converted to cash. Do you know which investments are liquid or illiquid?

Cash is the ultimate liquid investment. Money market accounts, checking accounts, and savings accounts are liquid as well. They are referred to as cash accounts.

Liquidity does not mean that you will not lose money. Stocks, bonds, mutual funds, and ETFs qualify as liquid. They can be converted to cash quickly. This is because they are traded in markets with lots of players and activity. This provides enough buyers for those who are selling.

Illiquid investments are those assets that either trade very thinly or require considerable work to find a buyer. Houses are an illiquid asset. It takes a lot of time and work to find a buyer willing to purchase your house. Many potential buyers may view the house before one is willing to buy. Then there may be counteroffers before a price is agreed upon and settlement takes place.

The housing market is vast. There are, usually, many people looking to buy and sell. The illiquidity comes from finding the right one and the length of time to complete the sale. Other assets are illiquid due to lack of buyers and sellers. These markets are referred to as thinly traded. Assets in thinly traded markets may sell for prices that are much higher or lower than anticipated.

Antiques and collectibles fall into this category. There are lots of collectors, but they vary in their chosen interest. Finding someone who is interested in what you have to sell can be difficult, especially if the collectible has fallen out of favor. The next difficulty comes with trying to find a buyer willing to pay the price you want. The collectible may need to be sold for less if you are in need of cash.

Most stocks, bonds, and ETFs are easily converted to cash. But some of these assets are illiquid too. This is because there is low volume of the asset making it thinly traded. You may have to accept less for these types of assets in order to get a buyer.

There is nothing wrong with holding illiquid assets. They can be profitable investments. You do want to have liquid assets though. This allows you access to cash if you need it. That lets you have time to sell your illiquid assets for their full value.

Life happens. Sometimes you need quick cash. A balance of liquid and illiquid assets offers you quick cash potential while leaving you with time to sell other assets at full value.

Are you interested in a simple portfolio to save for retirement? Please check out my book on building a simple retirement portfolio that is available at Amazon.com:

Investing $10K in 2014 (Sandra's Investing Basics)

Add Liquid+or+Illiquid+Assets to Twitter Add Liquid+or+Illiquid+Assets to Facebook Add Liquid+or+Illiquid+Assets to MySpace Add Liquid+or+Illiquid+Assets to Del.icio.us Digg Liquid+or+Illiquid+Assets Add Liquid+or+Illiquid+Assets to Yahoo My Web Add Liquid+or+Illiquid+Assets to Google Bookmarks Add Liquid+or+Illiquid+Assets to Stumbleupon Add Liquid+or+Illiquid+Assets to Reddit


Is a House an Asset or a Liability?
Investing and Collectibles
The Benefits of Cash
Related Articles
Editor's Picks Articles
Top Ten Articles
Previous Features
Site Map

For FREE email updates, subscribe to the Investing Newsletter

Past Issues

Printer Friendly
tell friend
Tell a Friend
Email Editor

Content copyright © 2015 by Sandra Baublitz. All rights reserved.
This content was written by Sandra Baublitz. If you wish to use this content in any manner, you need written permission. Contact Sandra Baublitz for details.


g features
Bond Portfolio and Interest Rates

Investing $10K in 2015 EBook

A Tribute to WSJ Sunday

Archives | Site Map


Past Issues

Less than Monthly

BellaOnline on Facebook

| About BellaOnline | Privacy Policy | Advertising | Become an Editor |
Website copyright © 2015 Minerva WebWorks LLC. All rights reserved.

BellaOnline Editor