#Liquidity101

Liquidity refers to how easily an asset or security can be bought or sold in the market without affecting its price. Assets that are highly liquid can be quickly converted into cash, such as stocks and bonds traded on major exchanges. On the other hand, assets like real estate and private equity are less liquid and may take longer to sell. Understanding liquidity is important for investors to manage their risk and make informed decisions. Higher liquidity generally indicates lower risk, as it provides easy access to cash in case of emergencies. By diversifying their portfolios with liquid assets, investors can ensure they have the flexibility to react to market fluctuations.