#Liquidity101

What is Liquidity?

In the world of finance, liquidity is the ability to convert assets into cash quickly without significantly changing its value. This is a core factor that helps the market operate smoothly.

For example, cash has the highest liquidity. Stocks of large companies are also quite liquid because you can easily buy and sell them. In contrast, real estate or art collections often have much lower liquidity, as it is difficult to find immediate buyers.

Liquidity is important because it allows investors to flexibly manage capital and minimize risk when they need to withdraw money. For businesses, good liquidity ensures the ability to pay off short-term debts. Understanding liquidity helps you make smarter investment decisions.