If you can convert an asset to cash easily and quickly, with little or no loss of value, the asset is said to have liquidity.

For example if you have shares or bonds in a well known company, such as Ford, GE or Microsoft, you could sell these easily within a few hours just by telephoning your broker but if you had shares in a small unknown company, you might struggle to find a buyer at a reasonable, or any, price.

In terms of alternative investments such as real estate, wine or antiques you would not be able to sell these very quickly, probably having to wait for a suitable auction or for the realtor to find a buyer. Such investments are termed illiquid.

Illiquid investments can show a bigger profit but if you might need your money out quickly then best stick at least some of your investment portfolio in liquid investments.

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