Definition:

Liquidity refers to the ease with which an asset can be purchased or sold.

Marketable securities that are traded in high volume tend to be the most liquid, or easy to trade without creating wild fluctuations in price.

Examples:

Cash is widely considered to be the most liquid asset due to the ease with which it can be converted into other assets. Other liquid investments include many publicly traded stocks sold on exchanges, as well as some mutual funds, exchange-traded funds (ETFs), and on-the-run government bonds (treasurys).

Related Terms:

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