Liquidity is a very important factor for the investors. Most of the investors do not look into the liquidity when they do the investments. Liquidity means how easily an asset can be converted into cash with the minimum loss of value. Now we come to a point that why liquidity is so important to investors. The answer is very easy. Liquidity takes care of our regular expenses. But liquidity in investments can help us to meet uncertain expenses like a health issue or immediate business expansion.
Now the most important thing is why it is overlooked. Usually, investors do not care about the liquidity while making the investments which ultimately results into loss of intrinsic value. Investment in ten-year locking product might be looking safe for the investors but definitely, investors need to find out the liquidity options. At a certain time, investors are so much obsessed with the return, safety or value that they forget about the liquidity.
Real estate and lock in bonds are prime examples. These investments are not liquid as much as mutual funds or fixed deposits. Sometimes investors think that investment in stocks is liquid. Yes, they are liquid compare to lock in products but if the value of the stock is less then investors have to sell it even at a loss to get back his/her liquidity.
So an investor should keep his liquidity aside in case of any emergency. He should communicate it clearly to his financial advisors clearly to keep an eye on his liquidity without much loss to his/her investments.Follow Us: