Liquidity is the quality of an asset that permits it to be converted quickly into cash without loss of value. Liquidity enables people and businesses to access cash to meet financial obligations.
With some types of capital investments, liquidity is a measure of the relative ease and speed with which a security can be bought or sold in a secondary market.
Examples of Liquidity
For example, a savings account is more liquid than a mutual fund which is more liquid than real estate. Learn more about other types of liquid assets.
Cash
Cash is the most liquid type of asset that is either stored in your wallet or deposited in a bank account like a savings or checking account. List of other types of liquid savings accounts.
Restricted cash
Restricted cash is liquid but may only be accessed after a specific time such as the maturity date of certificates of deposit.
Securities
Securities are considered to have liquidity in that they can be bought and sold.
Credit
Credit is also considered to increase liquidity when you have a line of credit available to use. However, during times of crisis access to credit may be limited.
