2. The lower the time taken to convert the asset to cash the more liquid the asset, like bank fixed deposits, listed equities and open-ended mutual funds.
3. The lower the cost incurred to convert to cash the more liquid the asset. Some assets have penalty or applicable exit load which adds to the cost.
4. The lower the price fluctuation in a quick sale of an asset the more liquid the asset. Liquid equity stocks can be sold without significantly lowering its price like the index stocks.
5. In personal financial planning it is recommended to maintain about six months’ expenses worth amount in liquid assets for emergencies.
(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
