Learning about investment liquidity

The investing world is filled with a number of different terms and tools you need to be aware of. Hiring a skilled financial expert to help you manage your investment portfolio is a great way to make sure are choosing the right investments and that you are going to have money set aside for your retirement. So what is investment liquidity exactly? Investment liquidity refers to how accessible your investments are. Let's say you need to use money from your investments to pay for your schooling or to pay for your expensive medical costs, will you be able to access your investment accounts.

Short-term financial needs are unpredictable and there will come a time when you need to tap into your investment accounts to help pay for these short-term needs. The biggest issue you face with investment liquidity is not having enough money when it's time to retire because you pulled too much money out earlier. The other concern is that you won't have enough money to pay for your existing financial needs as you don't have enough liquidity in your account quite yet.

Some of your investments need to be liquid investments so you can access them in a short period of time as you never know what will happen. How long will it take for you to cash out your liquid investments to pay for your emergency needs? Retirement funds are not accessible unless you have a "hardship" withdrawal. The liquid investments you need to make refer to accounts like your savings account, money market accounts, annuities, and stocks or bonds.

Most people have a savings account, but not everyone focuses on putting money into the savings account. If you don't have a nice savings built up, you don't have emergency money to help pay for whatever needs may arise and you will need to look into other sources to help pay for your hardships such as using your retirement accounts or getting a loan. A savings account is one of the easiest ways to build up liquid and you can easily transfer money over from your checking account with each paycheck.

Money markets have a higher interest rate compared to your savings account and they are one of the most popular liquid investment options out there. Money markets are considered "cash" investments as they are safe and reliable. They also have little fluctuation, making them a low risk investment compared to other investments like stock investments.

Annuities are another option you can use for liquid investments. Annuities are often rewarded to clients in lawsuits when they win the case. It helps to reduce the total payout amount now for the other side and it also provides you with extra tax savings compared to a lump sum payment from the insurance company. Annuities have different options you can choose from such as monthly payment options or yearly payment options. This is a great way to see that you will have a steady income for many years and you will be able to easily pay for any hardships you may have in the future. Once the lump sum amount has been invested in annuities, you cannot withdrawal the entire amount. You can only withdrawal the money that comes in the form of your monthly payments or yearly payments.

Stocks and bonds are also considered liquid investments, but they are very limited with their liquidity compared to money markets and savings accounts. Stocks and bonds are used mostly to grow your retirement accounts, not to be used to pull out money immediately. Typically you will have a waiting period you need to agree to before you have the option to actually withdrawal the money from these accounts.