Quora Answer: Why are Stocks & Bonds Considered Liquid Assets, but Houses are Not?

The following is my answer to a Quora question: “Why are stocks and bonds considered liquid assets, but houses are not?”

Liquid assets are defined as cash or cash equivalents on hand, or any assets that can be readily converted into cash.  Any asset readily convertible into cash is similar to cash itself, since it can be sold with little impact on its value.

Cash equivalents ordinarily refer to investments that have short-term maturities of less than 90 days.  They are considered liquid assets because they can be readily converted to cash.  Stocks and investment-grade bond, which are marketable securities; are considered liquid asset.  Many collective investment schemes, such as mutual funds, are considered liquid as well, since investors can sell their shares at any time and receive their money within days.  Some forms of insurance policies are also liquid.

Non-liquid assets are the opposite.  They are assets that are difficult to liquidate quickly.  This includes land and property investments.  They are considered non-liquid assets because it can take months for a person, or company, to receive cash from the sale.  Fixed deposits, endowment funds, and any form of investment with no ready secondary market is also illiquid.