Liquidity refers to the number of buyers and sellers available for an asset – which reflects how easily it can be converted into cash at a β€œreasonable” price by an investor. Assets that are liquid trade hands frequently – and as such, their prices are a fair reflection of what a seller can expect to receive or pay, like stocks and bonds. An illiquid asset, like property for example, changes hands infrequently and so the ultimate price an investor pays or receives might diverge significantly from the price last seen.

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