What is Liquidity And Why It’s Important

According to a recent CNN poll, 75% of US voters believe we are already in a recession.

That may not be the case, especially  with the current low unemployment of 3.7%, but that can change as  economic uncertainty persists with more companies pruning their  workforce.

Should a recession come in 2023, households will have more significant liquidity needs to continue to pay  their bills and fixed monthly expenses.

What Is Liquidity?

Liquidity is the speed and ease of converting an asset into cash with little or no loss in value.

Without liquidity, you may pay for your needs with credit cards that carry toxic interest rate costs.

Why Is Liquidity Important?

Households should review their  financial goals with their financial advisors, adjusting their financial  plans to provide liquidity.

Your Financial Plan Should Make Room For Liquidity

Market liquidity refers to the ease  of selling financial securities at relatively efficient prices in their  respective public markets.

Market Liquidity

The most liquid assets are cash, and interest-bearing accounts, including savings, checking accounts, and cash-equivalent or money market securities.

Most Liquid Assets

Bonds vary in liquidity, with those  with more frequent trading and at high volumes having more substantial  liquidity than bonds that trade less frequently.


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