Asset Liquidity: What It Really Is
Assets can be easily converted to quick cash with asset liquidity. With asset liquidity, it is guaranteed that you are selling your assets in a fair price that doesn’t give a negative impact to the actual market price. This is a good investment because it lets you make the most of your company’s assets and guarantees fast money compared to all other investments.
Low liquidity is common to long term investments these days. Penalties and taxes are among the common problems of companies these days as they sometimes come with the early withdrawals in their accounts. Most companies with these types of long term investments suffer from shortage of cash because of the nature of their investment.
A lot of companies resort to trading their stocks in the public as this is one of the few high liquidity remedies available for them. The good thing with these types of investments is that can be easily sold for little to no loss at all in terms of fees, values and taxes. As long as you know how much liquidity does your company need when it comes to assets, you are good to go. It is essential for every individual investor to have moderate liquidity. It cannot be denied that sometimes, medical bills, lay offs and other unexpected expenses may be needed. This is why you need to have an emergency fund that is accessible whenever you need it.
Financial advisors usually suggest getting a stock portfolio where you keep your low and high liquidity investments. Having a long term investment is advisable when you are saving up for your retirement. But you also have to make sure that you don’t touch your investments before it ripens to maturity. So it is always advisable to invest on stocks that are not only producing for a long period of time but can also be used if you need money before it matures. Having such assessment, you will know how important it is to have a well balanced as well as a diversified stock portfolio. Financial planners as well are suggesting you get an emergency fund for your investment.
But there are specific guidelines for an emergency fund since they have to be enough to fund expenses for up to six months and it also has to be readily accessible when you need it and it also has to be at a high interest rate account.
For low liquidity investments, emergency funds are one of the most effective solutions. This is because you can easily access your emergency funds when you have issues with penalties, taxes and all other dues. And liquidity is often an overlooked stock option. 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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