Wednesday’s Word: Liquid Assets

By Majda Muhic, fall 2016 student intern

Are you ready for the Zombie Apocalypse?

Liquidity refers to the ease with which an asset can be converted into portable, reliable cash. Liquid assets can be converted into cash quickly, painlessly, and without significant cost. This flexibility allows their owners to deal with both unexpected expenses and unforeseen opportunities.

If, after years of financial planning and investment, you were to wake up to a world taken over by zombies, everything you owned would be viewed through the lens of its liquidity: how quickly and easily could you convert it to cash – the ultimate liquid asset – with which you could pay your way through the maze of the Walking Dead and to safety? Your house would be of no avail, despite the locks on your doors and the increase in its value since the day you purchased it.

The value of liquid assets rests precisely in their convertibility to the ultimate liquid asset – cash.  Existing financial obligations and the desire to have immediate access to cash inform an individual’s liquidity needs and the types of investments individuals decide to make. Different types of investments carry with them different levels of liquidity.

Which of your investments will have you ready for the zombie apocalypse?