Derek Townsend has served as principal at Citifund Capital Corporation in Vancouver, Canada, since 2012. While he enjoys playing golf and rugby, Derek Townsend primarily focuses his time on providing clients with value beyond expectations and high value mortgage deals that allow for continued liquidity for clients.
“Liquidity” and “liquid assets” are terms individuals may often hear when discussing finances. That said, some people may not be clear as to what liquidity actually is, and how to determine whether an asset is liquid or not. In short, liquidity is used to describe the ease with which funds and other assets can be converted into cash, the most liquid of all assets.
Stocks and bonds are examples of highly liquid assets. In most cases, these assets can be sold in financial markets and converted into cash within a matter of days, at which point individuals can spend the cash however they like. However, larger, more valuable assets, sometimes called investment assets, are not so easily converted. Property, for example, as well as complex technology and equipment, can carry significant cash value but may necessitate weeks or months of waiting time. Property, in particular, can take years to yield spendable cash for owners.
Value is another factor that must be considered when determining an asset’s liquidity. A rare stamp collection, for instance, could be extremely valuable. That said, owners would need to spend considerable time to locate an interested buyer and arrange an agreeable transaction to achieve maximal value. On the other hand, owners willing to part with the collection at perhaps less than this value can gain access to cash more quickly.
Assets that lack liquidity can still be used to raise cash relatively quickly by borrowing against the asset. In these scenarios, a bank or other lender provides upfront cash while the individual or organization works towards liquefying the asset. Once the asset has been converted to cash, the loan and interest are paid back.
“Liquidity” and “liquid assets” are terms individuals may often hear when discussing finances. That said, some people may not be clear as to what liquidity actually is, and how to determine whether an asset is liquid or not. In short, liquidity is used to describe the ease with which funds and other assets can be converted into cash, the most liquid of all assets.
Stocks and bonds are examples of highly liquid assets. In most cases, these assets can be sold in financial markets and converted into cash within a matter of days, at which point individuals can spend the cash however they like. However, larger, more valuable assets, sometimes called investment assets, are not so easily converted. Property, for example, as well as complex technology and equipment, can carry significant cash value but may necessitate weeks or months of waiting time. Property, in particular, can take years to yield spendable cash for owners.
Value is another factor that must be considered when determining an asset’s liquidity. A rare stamp collection, for instance, could be extremely valuable. That said, owners would need to spend considerable time to locate an interested buyer and arrange an agreeable transaction to achieve maximal value. On the other hand, owners willing to part with the collection at perhaps less than this value can gain access to cash more quickly.
Assets that lack liquidity can still be used to raise cash relatively quickly by borrowing against the asset. In these scenarios, a bank or other lender provides upfront cash while the individual or organization works towards liquefying the asset. Once the asset has been converted to cash, the loan and interest are paid back.
