Asset Liquidity: What It Really Is
Assets can be easily converted to quick cash with asset liquidity. 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.
Some long term investments nowadays have problems with low liquidity. Penalties and taxes are among the common problems of companies these days as they sometimes come with the early withdrawals in their accounts. 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. Fortunately, these investments can be sold for no loss when it comes to values and there are also no taxes and fees. The only thing to consider is the amount of liquidity you will be needing in your assets. Moderate liquidity would be enough for most individual investors. It cannot be denied that sometimes, medical bills, lay offs and other unexpected expenses may be needed. Which is why you need reserved cash readily available in case of emergency or other urgent matters.
This is the reason why building up a portfolio of your low as well as high liquidity investments is advised by financial advisors. Having long term investments is perfect for your future retirement. However, no matter how tempting it may be, you shouldn’t touch your investments before it matures. This is the reason why you also need to have stocks that are good for long term but you can also make use of if you need fast money. This is where you will see the importance of a diversified and well balanced stock portfolio. Also, having an emergency fund is advised for many financial planners.
However, emergency funds have to be enough to supply you for up to six months and it also has to be placed in an account that provides high interest and can easily be accessed if you are in need of urgent money.
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 one of the mostly overlooked stock options is liquidity. 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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