What are illiquid assets?
An asset is described as 'illiquid' if it can't be exchanged for cash easily. This might be because there aren't many investors willing to buy the asset, or it doesn't fit into an established trading market. Examples may include real estate and shares in private companies.
Where have you heard about illiquid assets?
The term often hits the headlines when confidence in a particular asset is low. For example, the housing market lost some of its liquidity during the 2008 financial crisis, due to concerns about the economy and mortgage availability.
What you need to know about illiquid assets...
Illiquid assets tend to have more risk attached to them than other assets. During times of economic turbulence, they can be difficult or even impossible to sell without a heavy discount. And that means you could ultimately get back less than you paid for them.
The liquidity of an asset can go up or down over time, as investor demand changes. For example, artwork, antiques and collectibles may become more liquid if they come back into fashion among investors.
Find out more about illiquid assets...
Illiquid assets are the opposite of liquid assets, which can be traded much more easily.