Understanding the basics of the different types of liquid assets, how they work, and their importance is very important when it comes to working out a sound financial plan. Listed below is the definition of liquid assets, their types, and the most recommended forms of liquid assets to possess.

Liquid assets are financial assets that can be converted to cash very quickly and easily while losing little to no value of the asset during the intermediate process of conversion to cash. The liquidity of an asset is a spectrum of sorts. The sooner the asset can be converted to cash, the higher the liquidity of the asset. For example, cash in hand or in a bank is highly liquid in nature when compared to fixed assets such as land.

Types of liquid assets
Some types of liquid assets include:

• Cash or currency
• Checking account and savings account
• Stocks
• Bonds
• Investment funds
• Collectibles and valuable artifacts
• Jewelry
• Houses
• Small business (if the time to sell the business ever arrives)

Why is it important for everyone to possess different types of liquid assets?
Every person at some point of time in their lives, finds themselves in an emergency situation where they are in dire need of finances quickly. These unforeseen circumstances can range all the way from health problems to paying new fines. At times like this, quick access to cash can save the day. It always bodes well to have an avenue or two for liquid asset conversion.

The nature of investments as liquid assets
Stocks, bonds, market investment funds are all considered as liquid assets. However, as previously mentioned, ascertaining the liquidity of an asset is a spectrum. Investments take a longer time to convert into cash as compared to other forms of liquid assets such as cash deposits in banks and other financial institutions. But investments are still comparatively more liquid than long term assets. That is why investments form the second tier of liquid assets. The duration of the investment in question (short term or long term) is also a key determinant of the liquidity of the asset.

Best forms of liquid assets
Needless to say, hard cash is the best form of liquid assets and is at its most accessible form. The other forms of liquid assets that come close to hard cash include bank savings, checking accounts, and bank certificates for deposits, valuable collectibles, and artifacts.

A positive bank balance with a valid ATM card is the best form of liquid assets after hard cash. Stuff like lights, bar mirrors, jewelry, golf clubs, and family albums are alternative types of liquid assets that can be quickly converted to cash. With the advent of technology, collectibles and artefacts can be sold on online platforms. This increases the chances of the objects in question being sold and being converted into cash quickly.