Net worth

Liquidity

Liquidity is how easily an asset can be converted into available cash without losing value.

Cash and current accounts are fully liquid; exchange-traded funds take days and can sell at a loss; a property can take months.

Liquidity determines your capacity to handle emergencies: that's why an emergency fund should sit in fully liquid instruments even if they earn less.

Related terms

Emergency fund — An emergency fund is a liquid cushion equal to three to six months of fixed expenses, set aside exclusively for unexpected events.
Asset — An asset is anything of economic value you own: cash, investments, real estate, vehicles or loans made to others.
Net worth — Net worth is the difference between everything you own (assets) and everything you owe (liabilities), valued at the same point in time.

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Educational content. netclariq does not provide financial, investment, tax or legal advice.