
When you immediately need money it is likely that you would check your wallet or your bank account to access cash easily. However, there’s a solution to access cash instantly — liquid assets.
What are liquid assets?
Easy access to cash by selling off assets at a minimal loss or same value is called liquid assets. Assets such as cash in hand, cash in a savings account or a checking account, government bonds, mutual funds, promissory bonds, treasury bills, etc are considered liquid assets. An asset is treated as a liquid asset only when there are a large number of buyers interested in buying it from a secured market.
The easier way to access cash without any hassle is cash in savings or checking accounts or cash in hand. Selling any liquid asset can give you easy access to cash, but there might be a minimal depreciation on the market value of the product depending on when you are selling it. Investors need to make sure there are a few liquid assets that they can rely on before investing in a business.
The thumb rule for running a successful business is to never run out of money. Liquid assets are also essential for a layman in scenarios such as layoffs, medical emergencies, or anything that needs immediate attention.
The different types of liquid assets
- Stocks: They are considered as sharing a part of the company’s ownership. This does not mean the stock investor owns the company but it means that they own shares delivered by the company. By investing in a company’s stock, the investor holds the right to receive a part of the company’s profit depending on the percentage of the share they hold. The condition applies vice-versa when there is a loss; however, you will not be forced to sell your shares or stocks at a lower value.
- Mutual funds: They may sound complicated, but they are tension free investments. Mutual funds are managed by professional fund managers who take care of the money invested by different investors on a particular company. Mutual funds give easy flexibility in investments and the freedom to liquidate when required.
- Promissory note: It is considered as a financial or negotiable instrument. These notes are counted as a written promise from one party to another party to pay a specified amount either on demand or by a future date. It is mostly used as a source of short term investment in a business. These notes can be liquidated easily. If they are left till the end of the maturity date, users can gain a full interest rate.
- Savings account: This is the safest way to preserve money when compared to having it in hand or stored at home. Money preserved at home can be robbed, lost, or destroyed due to unfortunate events. There are barely any risk factors in a saving account. As your money sits in your savings account, it earns a very small amount of interest.
- Money market account: These accounts are similar to that of savings account; however, the interest earned and the minimal balance amount required in these accounts is higher when compared to a savings account. Money market accounts are managed by banks and are restricted to the number of cash withdrawals per month.