Understanding Asset Liquidity

“Money is plentiful for those who have the simple laws which govern the acquisition to understand.” -George Clason

Let’s start by defining the liquidity of assets. Liquidity refers to the extent that can be bought and sold without the price an asset. Liquidity also refers to the ability to take an active and sell quickly for money. Cash investments are better because they allow the casual investor to use the asset if they need it. Their money High investment liquidity under money markets and blue chips. Basically liquidity is the measurement of how fast an investment can be redeemed for cash at a small loss.

Any type of long-term investment has low liquidity. For example, 401k’s and IRA’s are difficult to exchange for cash because they related to the early withdraw penalties and taxes on those accounts. A large part of the time necessary in order to sell this type of investment of money, and therefore is not available to these options.

High liquidity options include stocks that are publicly traded. These investments can be easily sold with almost no loss in value, no fees or taxes. The most important question to ask yourself is how much cash do you need in your ability. Most individual investors should have at least a limited degree of liquidity. Individuals are often subject to unexpected expenses like medical bills, or dismissed. It is important to make money readily available in case you have to pay for something important.

Most financial advisors suggest that an equity portfolio consists of high liquidity and low investment. Long-term investments are essential to saving for retirement. However, this type of investment can not be touched before ripening. Therefore it is important for a number of stocks that make a profit, but also can be easily sold if you need the money. Having a balanced and diversified equity portfolio is extremely important if you want a successful investor. Many financial planners suggest that investors an emergency fund.

This fund shall consist of at least six months of expenses and have a high interest money market account that you can draw checks be placed. This is a good solution for low liquidity investments. Instead of early penalties and taxes to endure because you need money, you can use. Your emergency fund Liquidity is the most over look characteristic of stock options. Often the new investor will not realize the need for liquidity only after they have invested in low liquidity vehicles all their money

How Do Interest Rates Affect Investments?

“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to everyone. But I can guarantee one thing .. those who will have a lot more money when they come to retire than those who never around an investment program to “-. Noel Whittaker

The interest is not an exciting field. Regardless of their entertainment value, it is in your best interest to understand what interest rates are and how they affect your investments. The interest rate is defined as the rate paid on borrowed money. This percentage is applied to the principle of a loan and is usually calculated annually. If the interest rate on your $ 1000 dollar loan is 10%, at the end of the year the bank will charge you $ 100 dollars. Interest rates fluctuate all the time so they constantly affect how companies grow and there by affect the price of stocks.

Changes in interest rates affect the value of a companies shares. This is because the risk of a particular investment rises as to raise interest rates. As a risk factor increases the cost of the stocks fall, and investors lose money. However, the reverse is actually beneficial. If the U.S. Reserve decides that the interest rate will be reduced, then stock prices rise, and an investor makes more money.

A rise in interest rates will increase. The cost of capital A company, under higher interest rates will have to work harder to create a higher return. If a company fails to generate more return rates will take a lot of their profit. As to raise interest rates, profits decline and this causes the stock to lower value and the investor loses money become. It is important to remember that companies have debts in mind. An increase in interest rates means that their monthly obligations go up in price. If they can not afford the increase, their viability is at risk.

A rise in interest rates is usually a good indicator of a slowing economy. The higher interest rates deter people from purchasing things and stop investing in stock options that will help them grow. Companies This causes sales, profits, and stock prices fall. The role of interest in investing is complicated and can be difficult to understand. In general, increasing the interest rates are bad for investors because it is bad for the companies they invest in. Educating yourself about the interest rate is important because if you can anticipate a rise in interest rates can make your financial plan and adjust offset these increased rates the investment portfolio.