Low liquidity investments are very popular in the market. However, they give a little less interest rate than the high-risk factor investment. real estate is the lowest liquidity investment in the market. Read below to know about more low liquidy investments.
Investments with the least liquidity
Investments are the subject of market risks. You never know when will you be on the loose and when will you gain profit from the investment. A low-risk investment is usually a short-term investment. The chances of losing money are almost negligible here. But the interest rate will be less too. If you are investing in a long-term program then the chances of risk increase but in the end, you will get high returns. People who are new in this investment field are likely to choose the low-risk investment.
Low-risk investments are also known as least liquidity investments. I am here to tell you which investments have the least liquidity.
What is liquidity?
The concept of liquidity refers to the efficiency of converting investments into cash without affecting their market value. Some assets that you can buy easily and sell easily are considered high liquidity investments. Real estate is the least liquid investment among all the assets. You may buy land easily but it is hard to sell that easily. If you want to sell the land in a hurry then you have to lower the piece of the property. Hence this investment is the least liquid among all.
Now take another example. If you have some stocks of Microsoft or apple then it is very easy to sell them. You can sell them quickly at the highest price that you have imagined. Hence these investments give the most profit out of it.
Types of investments
There are various types of investments available to investors. Some of them are called low-risk investments while some are known as high-risk investments. Some examples of investments are as follows:
- Mutual funds
- Real estate
- Money market fund
It is up to you who will decide where you want to invest your money. However, if you are a beginner then I will suggest you go with the low-risk (least liquid) investments. Through these, you will learn the tricks of investment. And with time when you gain some confidence then you can go with the high-risk investments.
Importance of liquidity
Following are the importance of liquidity in the investment field:
- Help to release emergency funds.
- Give chance to change when better opportunities arrived
- Give smoother vision in the hard times.
Hence liquidy plays a very important role in the investments. Especially for the new people. It helps them to learn. You will lose less and learn more. Hence its importance increases.
What are the least liquidity investments?
Now time to explain some of the least liquid investments. Some of them are as follows:
- Certificates of deposit
- Real estate
- Treasury bills
- Money market account
- Fixed annuities
- Saving bonds
Let’s learn about them one by one.
#1. Certificates of deposits
These are issued by the banks. These have FDIC insured hence the chances of loss are negligible. They have a fixed amount of time say 1 to 6 years. In this period you keep your money in the bank. They called this maturing period. If you will take the money before the maturing period then you will have to pay fines. But if you keep your patience then you can get benefits. The amount that you will get depends upon the period that you will select. If you choose more time more money will receive. It is good for those who are seeking long-term investment.
#2. Real estate
The details of these least liquid investments have been mentioned above. For the highlight, it is the investment where you buy quickly. But sell with some time and also sometimes with lower price. However, this can give a very good credit score. If you sell this by keeping some time in your hand. The price of this actor increases very quickly.
#3. Treasury bills
These are another best example of the least liquidity investment. It is a better option than savings accounts. You can buy them like mutual funds. The minimum investment required for these is $100. However, the interest earned will be the same. And you will receive a fixed interest value every six months. You can also invest long-term in this asset. They have options for 2, 10, and 30 years. The risk rate is negligible in this and the profit value is fixed. It is good for the beginner and worth trying for the old ones.
#4. Money market account
This is another type of investment from the bank. Money market accounts are just like savings accounts. The only difference is that it requires quite a high minimum deposit value. But with this, the interest rates are also high for this account. The risk factor is almost zero. Plus you will have security for your money.
People tend to trust banks more than anything. This is the reason why stocks and mutual funds are not very popular yet. Although they both give more credit scores than the bank. But bank gives more money security and that is why people choose the bank first.
#5. Fixed annuities
This investment is made with the insurance companies. And it is the perfect example of the investments which have the least liquidity. Here you deposit a certain amount for a certain period. After the maturity period, the insurance company will give you the benefits. They pay by two different methods. One is where you receive your interest amount every month regularly. And another one is where you will receive your amount in one full payment. The first option is good for those who are retired from their jobs or have no jobs. It is good for old age people too.
Most people choose a monthly payment option. Because it is more satisfying and you will not have to worry about your monthly expenses. This investment has gained more popularity in the past 5 years. Hence you can give this a shot.
#6. Savings bond
These are security bonds that are an investment which has low liquidity in the market. These are of two types:
- EE bond
- I bond
In the EE bond, you will receive a fixed amount of interest for 30 years. Hence it is best for elderly people. While in the I bond the interest received depends upon a lot of factors. We do not need to go in-depth about this.
#7. Investment in gold
Another good example of the least liquidity investment is gold. People invest more and more in gold. Because of the increasing prices of gold. The price of gold is increasing worldwide. Hence if you buy gold today then its value will be almost double in the coming 10 years. People do not sell their gold easily. They only sell that in case of an emergency. It is because they know the value of gold in the future.
Gold has more value than diamonds. Because diamonds usually have a fixed price while gold prices fluctuate a lot. Mostly they go up. They come down to almost a negligible number. Hence it s the best investment that you can do. Also, the bank offers a very good interest rate if you keep your gold in the bank.
In conclusion, these are all detailed explanations of the least liquidity investment. Beginners invest in this type of investment. However, if you give these low liquidity investments some time then they can give you a very good benefit. Every investment has its policy and its benefits. So can not compare two different investments. You can come are the same investment with different companies though.
If you are a beginner who wants to invest your money in the stock market, this guide is just right for you. Above mentioned investments include both long and short-term programs.