BS Primer: What is liquidity and why does it matter?

When you are busy investing in high-return generating assets, don't forget to consider the liquidity aspect.

What is Liquidity?

Liquidity explains the extent to which an asset can be converted into cash without significant loss of value. You may perceive it as an ability to realise the maximum value of an asset by purchase or sale without impacting the price of the asset. From an investment point of view, liquidity relates to the ease with which an asset can be bought or sold to meet the urgent need of cash. Of all the asset classes, cash happens to be the most liquid asset. Highly-traded stocks is yet another asset class which can be regarded as fairly