Understanding liquidity is essential for smart investing. Liquidity refers to how quickly and easily an asset can be converted into cash without affecting its market price. Cash is the most liquid asset, while real estate and collectibles are less liquid. In markets, high liquidity means faster trades and smaller price fluctuations. Low liquidity can lead to volatility and difficulty selling assets when needed. Whether you’re trading stocks, investing in crypto, or managing a business, knowing the liquidity of your assets helps you make better financial decisions. Always consider liquidity risk before committing funds.
