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What are liquid assets?

Liquid asset

What are liquid assets? Liquid assets are assets that can easily be converted into cash without a negative impact on their value. Examples of liquid assets are: cash itself, money in a savings account and investments such as stocks, bonds, mutual funds or money market funds.

Key takeaways:

  • A liquid asset is an asset that can be quickly and easily converted into cash without a significant loss in value.
  • Examples of liquid assets include cash, savings accounts, government bonds, and blue-chip stocks.
  • The liquidity of an asset is determined by its trading volume, bid-ask spread, and the time it takes to settle a trade.
  • Liquid assets are important for investors and financial institutions because they provide flexibility and can be used to meet short-term financial obligations.

Where have you heard about liquid assets?

You will have heard about liquid assets if you've ever spoken with a financial adviser. Many recommend that everyone keeps enough of their assets in liquid form to live on for 3-6 months. This is in case of an emergency, such as losing your job.

What you need to know about liquid assets

Examples of things that aren't liquid assets include things like real estate, eg your house. Real estate isn't a liquid asset because it can take a long time for the seller to receive the funds from the sale.

Another example of a non-liquid asset is ownership of a company. This is because selling a company can have a negative impact on its value.

Find out more about liquid assets

Read more about assets, liquidity and liquid market.

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