Liquidity
Next 
How much and how often do you need access to your funds?
In the investment world, liquidity is the ability to access your money — to be able to quickly get money out
of an investment by selling some or all of the investment without significant expense, delay or likelihood
of loss.
In a diversified investment portfolio, some holdings will be more liquid than others. For example:
- Stocks and bonds can be sold any day the financial markets are open – assuming buyers are available. But
you may have a loss if you need to sell in a declining market. What’s more, you may become liable for
capital gains taxesand you may have to pay a broker’s fee.
- Most mutual funds shares can be redeemed at any time, at a price that is set once a day. If prices are
falling when you sell, you’ll take a loss. And you’ll pay capital gains taxes on any share price
increase or reinvested dividends.
- Annuities, which are part investment and part insurance, are generally not liquid, meaning that you
cannot cash them in without incurring significant penalties. Some annuities waive or reduce redemption
penalties after a certain number of years. (See Annuities.)
- With CDs you can access your money if you need it, but typically will pay an early withdrawal penalty.
Some specialty CDs provide penalty free access or allow for access at regular intervals.
- The greatest liquidity is available through money market funds and savings accounts.
More
For more information, see Diversification.