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Definition: Liquidity refers to the ability of people to get into and out of investments. A "liquid" stock is a stock with a lot of volume that is easy to buy and sell.
StockJargon Advice: A liquid investment is one that you can buy and sell easily and quickly. An example of a liquid investment is a bank account. You can go to the bank and take your money out quickly and easily. An example of an illiquid investment would be real estate. If you want to sell your house, you have to put it on the market and could end up waiting over a year to get your money.
Understanding how liquid you need to be is important. Obviously, if you're in college, you want to be liquid so you can make your tuition payments. If you're retired, you'll want to be liquid to pay your living expenses.
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