#Liquidity101

Liquidity 101Liquidity refers to how easily an asset can be converted into cash without affecting its market price.

In finance, it’s a measure of market efficiency and asset accessibility. Cash is the most liquid asset, while real estate or collectibles are less liquid due to longer selling times. Markets with high liquidity, like stocks on major exchanges, have tight bid-ask spreads and quick transactions.

Low liquidity can lead to price volatility and higher transaction costs. For investors, understanding liquidity is crucial for managing risk and ensuring access to funds when needed, balancing potential returns with asset accessibility.