![]() ![]() Here’s a quick look at the most common types of liquid assets held by both individuals and businesses (some of these will be expanded upon in more detail further below): Some of these are more liquid than others, depending on how quickly and easily they can be converted into cash. In addition to physical cash, liquid assets will generally fall into one of two categories: cash equivalents or financial accounts. Owning liquid assets is important because they allow you to pay for basic living expenses and handle emergencies when they arise.Īll types of assets can be considered liquid. Marketable securities such as stocks, bonds, and mutual funds all fit the bill since they can be bought and sold for cash readily. ![]() It must also be relatively easy and secure to transfer ownership. Quick cash conversion is the main factor that contributes to an asset’s liquidity, but for an asset to truly be considered liquid, it must be traded on a trusted market with a large number of buyers and sellers. Liquid assets are often viewed like cash and are sometimes referred to as cash equivalents because they can easily be exchanged for cash at any time. ![]() So by that definition, cash is considered the most liquid asset.Ī liquid asset can quickly be converted into cash without losing much of its market value. The easier it is to exchange an asset for cash, the more liquid it is. Liquidity refers to the ease with which an asset (anything you own that has monetary value) can be converted into cash. ![]()
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