Quick Question

[freeballer16]

When someone says they need their money liquid, does that mean that can get access to it easily without paying fees.

[poundwise]

Re: Quick Question


Although, technically, liquidity refers to the quality of being readily convertible into cash with minimal loss of value, most of the time when you see people referring to keeping their "money liquid" they are referring to cash, such as money in a savings account. The idea is still that the money is readily available; not tied up in an investment/other asset.

[disneysteve]

Re: Quick Question

When someone says they need their money liquid, does that mean that can get access to it easily without paying fees.

I'd say that's a good description.

For example, I can access the funds in my one money market or checking account by writing a check. I can access the funds in my other money market by doing an electronic transfer online into my checking account. Those transactions would be free.

However, money in my investment accounts aren't easily accessible. I would need to sell shares of stock or mutual funds to get that money. And that would create a taxable transaction and, in some cases, cost me a sales commission. I would also have the risk that I'd be selling in a down market and lose money on the transaction.

[shelbylovesmelby]

Re: Quick Question

OP - you answered your own question

[Mathew Green]

Re: Quick Question

Like a lot of other things, liquidity is measured on a sliding scale:

Money in my pocket is totally liquid.

Money in my checking account is easily available by writing a check, making an electronic transfer, or going to the bank to withdraw cash.

Money in my online savings account is easily available, but would take a few days for the transfer to my checking account to be completed.

Money in a stock or bond can't be accessed until the market is open, your order is executed, and the electronic transfer to your checking account is completed.

In addition, some stocks move up fairly steadily and are actively traded, which means you can sell them almost any time without taking a loss; but other stocks are thinly traded and/or have wide fluctuations in price, which means you'd have to wait for the right moment if you wanted to get full price for them. The steady active stocks are considered more liquid than the volitile thinly-traded stocks, even though either of them could be sold on almost any trading day.

Money in a CD can't be accessed till it comes due, unless you're willing to pay a penalty.

Financial paper, like a second morgage given to you as partial payment when you sold your house, is even less liquid and may have to be sold at a steep discount if you need the cash in a hurry.

And a house or other real estate is the least liquid asset of all, except in a true housing boom.

So it's really a question of how 'liquid' you want your assets to be, not an either-or proposition.

[PRICEPLUS]

Re: Quick Question

Well you could be a tavern owner and then your wealth truly is "liquid"! Sorry I couldn't help myself!!!!