Earning money is very important to live an uninterrupted and desired lifestyle. That is why, saving your money is a wise choice. While investing money, one should make sure that it is invested correctly.
It is very important to have some of your savings as liquid assets. They are real lifesavers when you need money instantly. Put yourself in a situation where you stop getting paid due to a layoff or any other emergency that stops you from earning your monthly salary. It is ideal to have assets that can back you up during these situations and liquid assets play an important role there.
Benefits of liquid assets
- Keeps you prepared: Whenever you need money for an emergency, you don’t have to look for somebody’s help. If you have invested a part of your savings into liquid assets, you can always look at it as lifesavers in such scenarios. Liquid assets keep you prepared for any scenario that hits your pockets hard. They give an easy access to cash by selling the assets without losing their original value.
- Flexibility: Saving your money on money-market accounts gives you the ability to access your money anytime you need. You can sell a part of your stock when there is a hot deal to benefit from higher rates. This way you can invest in some new stock that can be of greater value in the future by just selling a portion of your old stock.
- Lower risk: Unlike illiquid assets, liquid assets can be sold quickly, without any hassle and without compromising on its original price. Saving accounts are considered to be the safest way to keep your money liquid. It can be redeemed when required and is always at the same price you invested in. It is insured by the federal government, and they are not easily destroyed unlike saving at home, which could be risky. It keeps you tension free as it stays safe in the bank.
- Good financial profile: Investing money wisely on liquid assets keeps you in good books with your financers, who can confidently lend you a loan when required. When there is a need for a mortgage, you don’t have to worry about approvals if you have invested your money on liquid assets. They impress financers, and they label you as a wise investor, as they foresee your capability of paying back the loan at any situation.
What to consider before investing in liquid assets
- Low-risk: There could be situations where your stocks are in a bad shape to be sold due to a dip in the market price. So when you decide to sell your shares in case of an emergency, you might be offered a lower price when compared to its original price.
- Expense ratio: Before investing in a liquid fund or an asset, it is important to look at its expense ratio numbers. The expense ratio determines the operating capability of a mutual fund scheme. It gives you a clear picture of how much of your money invested is used for managing the expenses of your fund. The lower expense spent gives you higher returns.
- History: It is important to choose funds from a company who has had better sales in the last 10 years. One should check if the performance of funds is consistent in delivering higher return rates over the past 10 years.
