Liquidity is one of the most important yet misunderstood concepts in finance. Simply put, it’s the ease with which you can convert an asset into cash without significantly affecting its price. Cash is the most liquid asset, while things like real estate or collectibles are far less liquid. High liquidity means smoother transactions and better access to funds when needed. For businesses, strong liquidity ensures they can cover short-term obligations, which is essential for survival and growth. As an investor, always consider the liquidity of your assets—especially in volatile markets. Understanding liquidity isn’t just for experts. It’s a basic, powerful concept everyone should grasp for better financial decisions.
