Asset Liquidity: What It Really Is
In asset liquidity, you can sell your assets for fast and easy money. This way, assets are being sold without even affecting its price. This type of investment is very helpful most especially if you want to make the most of your assets.
Most long term investments in the market these days have low liquidity. A lot of companies have problems with taxes and penalties that often comes with their account’s early withdrawals. Since these companies are in need of more time to get through their investments, they are also in need of more money to compensate.
Some companies even opt for publicly trading their stocks which is just one of the high liquidity options available for them. The good thing with these types of investments is that can be easily sold for little to no loss at all in terms of fees, values and taxes. The only important factor to consider is knowing how much of the liquidity you need in terms of your assets. It is essential for every individual investor to have moderate liquidity. This is because lay offs and other unexpected expenses may occur including medical bills. Which is why you need reserved cash readily available in case of emergency or other urgent matters.
Financial advisors usually suggest getting a stock portfolio where you keep your low and high liquidity investments. Having long term investments is perfect for your future retirement. But you also have to make sure that you don’t touch your investments before it ripens to maturity. So it is always advisable to invest on stocks that are not only producing for a long period of time but can also be used if you need money before it matures. This is where you will see the importance of a diversified and well balanced stock portfolio. This is also the main reason why financial planners usually suggest getting an emergency fund together with your investment.
But there are specific guidelines for an emergency fund since they have to be enough to fund expenses for up to six months and it also has to be readily accessible when you need it and it also has to be at a high interest rate account.
One of the best known solutions for low liquidity investments is having emergency funds. They are very useful when you are facing issues with dues such as penalties and taxes. And liquidity is often an overlooked stock option. But later on, new investors will find out that is after all very useful most especially if you are still starting with your investment venture.
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Cited reference: wikipedia reference