Liquidity (original) (raw)

Liquidity is a business term that refers to the ability to quickly buy or sell a particular item.

A stock is considered highly liquid (or simply liquid) if it is widely available and people are willing to buy and sell it. Stocks with limited public shares, or ones that are over or under valued will be hard to move, becoming illiquid. The same terms can be applied to almost any item, from commodities like oil, to currencies like the US Dollar, to trinkets like Beanie Babies.

Often liquid investments, like stock, are considered to be more valuable than investments that are considered relatively non-liquid, like real estate. Because of this, one may have to pay a liquidity premium on relatively liquid investments.