Glossary

Liquidity refers to the ease with which an asset can be bought or sold in a market without significantly affecting its price. 💦

Highly liquid assets, such as cash or stocks, can be easily converted into cash without a substantial price change. Illiquid assets, like real estate or collectibles, may take longer to sell and might require a price reduction to attract buyers.

For example, government bonds are typically considered liquid investments since they can be quickly bought or sold without causing dramatic price fluctuations.

Fun fact: The term "liquidity" comes from the Latin word "liquidus," which means "fluid" or "flowing". 🌊 In finance, it signifies how easily assets flow through markets, much like the movement of water in a river.