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Illiquid Assets

Illiquid assets are investments that cannot be quickly or easily converted into cash without significantly affecting their value. These assets often require a longer time to sell or may have limited buyers, making them less attractive for investors who need quick access to funds. Examples of illiquid assets include real estate, private equity investments, fine art, or collectibles. Illiquid assets tend to have higher risks and can limit financial flexibility but may offer long-term returns.

Example

A commercial property is considered an illiquid asset because it may take months or years to find a buyer, and selling it quickly could result in a lower price than its market value.

Key points

• Difficult to convert into cash quickly without a significant price reduction.

• Examples include real estate, private equity, and collectibles.

• Carry higher risks and may limit liquidity but offer potential long-term returns.

Quick Answers to Curious Questions

An asset is illiquid if it cannot be sold quickly without a significant price reduction due to limited market demand or lengthy sale processes.

Risks include difficulty selling in times of need, potential price drops in forced sales, and the inability to access cash quickly.

Illiquid assets can provide long-term returns and diversification but require investors to maintain a longer investment horizon and tolerate limited liquidity.