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POSTED ON AUGUST 27, 2019    

How finance folk use it: 

Liquidity is how easy it is to exchange something with money. Some investments are very liquid because you can convert them to cash quickly. Some investments like houses are not very liquid because it’s hard to sell them.

Is it good or bad?

Liquidity is good because if you need money, you can get it. When it comes to investments, you get rewarded if you’re willing to sacrifice liquidity. Time deposits and bonds that take longer to mature usually have higher interest rates. Properties may be hard to sell but they are usually worth a lot. 

What it means for you

It’s important to make sure you have things that have high liquidity. It’s better to have money than to have to wait for it. But if you’re in a position where accessing money isn’t a problem, then you can afford to invest your money somewhere not-so-liquid.

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