What Does Liquidity Mean?

It is a measure of how quickly and easily you can turn an asset into cash without significantly affecting its value.

High liquid assets are those that can be converted to cash quickly, like:
– Cash itself
– Savings in a bank account
– Mutual funds, etc
Low liquid assets are those that take time or effort to sell, such as:
– Real estate
– High value collectibles eg. Gold
Private company shares

Liquidity is essential when you need quick access to money for emergencies or investments.
Highly liquid assets ensure you’re financially flexible, while less liquid assets may lock up your money for longer periods.

For Example:
If you own a house worth ₦20M, it might take months to sell it and get the cash.
But if you have ₦20M in a savings account, you can access it instantly. That’s the difference in liquidity!

For a well diversified investment portfolio, it is best to have a good mix of liquid and non liquid assets.