Making investments in the financial markets may be a rewarding decision for many individuals but it is also very important to understand the different concepts that may affect your investment choices. One important concept in this is Liquidity.
So, what is Liquidity? Liquidity in investments is how quickly and easily an individual can turn their investments into cash. In the case that an asset is very liquid, you will be able to convert it into cash quickly, and it will also require less cost to make this conversion. The less liquid an asset is, however, the longer it takes to convert into cash and the more costly.
Liquidity in Mutual Funds: Mutual funds are a way to invest where many people pool their money together, and a fund manager invests that money in a mix of stocks, bonds, or other assets. How easy it is to get your money out of a mutual fund depends on how easy it is to buy or sell the assets the fund invests in.
