What is liquidity? What are liquid assets?
Liquidity is a measure of how easily you can unload your holdings in a particular investment without losing substantial value. Liquid assets are those most readily converted to cash within a year or less. Generally, the more aggressive an investment is, the more subject you are to the risk of holding an illiquid asset. Stocks of small companies and junk bonds, for instance, are relatively easy to buy and sell under normal conditions. But when bad news hits these markets or investors become cautious, the ability to sell at a fair price may temporarily vanish.
