The Best Types of Liquid Investments
September 13, 2021
What are the best types of liquid investments?
- Savings Accounts
- Certificates Of Deposit
A liquid investment is an asset that can be quickly converted into cash when you need it. On the other hand, a non-liquid investment such as real estate will take a long time before it can be turned into cash. The advantage of the former is that you can have access to your funds as quickly as possible. If you want to know what is the best liquid investment for you, keep on reading for some recommendations!
One of the most common and low-risk liquid investments is a savings account. Remember that the more money you deposit, the more you will earn on your account. At the same time, you can easily access the money to settle your expenses. Although it will only accumulate low interest over time, it gives you the most protection from market risk.
If you want to earn from your savings account, go for a high-yield option. You can do a bit more research on different banks to find the best rates. Remember that a savings account is best for short-term investment only because of inflation.
Certificates Of Deposit
If you want to earn a higher interest rate using your savings, then another investment you need to consider is a Certificate of Deposit (CD). CDs require you to deposit money for a certain period of time.
Although considered a liquid investment, you need to wait for a time deposit to mature before you can earn money. The time will depend on whether you invest in a regular time deposit or a long-term negotiable CD. This is a smart way to invest because you are guaranteed a return despite interest rate fluctuations over time.
If you’re looking for a medium or long-term investment, you can also consider using your money to buy shares. These can be sold in the stock exchange market quickly, which makes it a highly liquid investment. When you own a share of a company, you can also earn a part of its profits as dividends.
Your money is exposed to higher risks if you invest them into stocks, so make sure to research well first. On the other hand, your stocks can also increase in value significantly if you invest smartly.
Exchange-Traded Funds (ETFs) are also traded in exchange just like a regular stock. But the difference is an ETF holds multiple underlying assets, which makes it a popular choice if you’re looking for diversification. An ETF can cover stocks from different industries or can be isolated to one sector.
It would be expensive to purchase all the stocks in an ETF portfolio individually. The advantage of investing in ETFs is the lower costs and risk due to diversification. It is also highly liquid because you can trade your investments during market hours.
Let your money work for you by putting it towards different types of liquid investments. Depending on your desired outcome, the investment you should look into might differ. Do your research so you’re better prepared for any risks that you might encounter.
Are you still wondering what is the best liquid investment for your financial situation and goals? As an expert in business and finance, Benito Keh can help you determine the best option. If you’re interested, you can reach him here.