Liquid assets are possessions that can be instantly converted or ‘liquified’ into cash, whenever required. In a sale, there is little or no effect on the value of such assets, unlike non-liquid assets. Liquid assets are used as securities. They do not have a lock-in period, so you can access them at any point in time.
The present market structure is different from the traditional one. Today, people like to have their money in their hands instead of investing it in assets that cannot be sold readily. Because high taxes do not allow people to possess cash in abundance, people have begun investing in assets that can be sold off easily during a financial emergency.
Liquid assets have lower risks and provide great returns during inflation. Not only that, they offer excellent tax benefits. They are a need in the current world, so it is necessary to understand what investments can be categorized as liquid assets. Here are some investments that can be considered liquid assets.
Mutual funds
Everyone nowadays is investing in mutual funds religiously. It is a professionally managed investment that draws money from several investors and invests in diverse segments. Even though people were hesitant in earlier times, they have now accepted mutual funds as a necessary financial aid instead of purely an investment.
Bonds
A bond is a debt given to an issuer, who is liable to pay fixed amounts of interest at specified dates to the holder. They are in paper form instead of actual cash. They can be purchased directly from an organization that needs to raise funds or needs financial aid without having to go to a bank. They yield long-term and short-term benefits.
Stocks
The stock market is one of the most flexible platforms for investing. It offers various forms of investments for everyone. It allows you to make monthly, quarterly, or yearly investments, as well as one-time investments. Stocks provide you the liberty of being in charge of your own money. The stock market allows you to invest and withdraw your funds instantaneously without any inconvenience.
Certificate of Deposit
This is a rigid liquid asset. In this type of investment, you can make a one-time deposit of funds, which is locked-in for a specified period. You are not allowed to withdraw the funds until the maturity date is reached. A specified amount of interest is earned through this investment till its date of maturity. Withdrawing the funds before maturity attracts a penalty.
Liquid assets are the need of the hour. Although many are aware and are readily investing in them, liquid assets are not completely reliable. They are subject to market risks and changing federal policies. This has invited a lot of debates on whether investing in liquid assets is better than the non-liquid assets. While the traditional section of the society thinks non-liquid assets are better, the modern prefers the former.
