Unraveling the Mystery of Investing #2

Liquidity Risk


Liquidity risk means not being able to liquidate an investment quickly while keeping the original investment amount intact. This can occur with investing in bonds where the bond must be held to maturity in order for you to achieve a specific interest return. It can also be a risk should you invest in a particular stock, but find that the price is down at the same time you need to get your hands on the cash invested in that specific equity. For this reason, any dollars you need to access for the purpose of educational spending or maybe the purchase of a house should never be invested in the equities market.



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Content © Rich Brott, 2011

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