Exploring the 6 Best Types of Liquid Investments
June 1, 2023 2023-06-01 12:04Exploring the 6 Best Types of Liquid Investments
Investing in properties can be great, but the process and time it takes to make it happen can be challenging. Liquid investing offers a solution by allowing you to build wealth while keeping your funds easily accessible.
So, what are liquid investments? These are investments that can be quickly converted into cash without significant costs. They provide the flexibility to use your funds for savings or major purchases like a car or a house, while still earning interest on your existing investments.
While the benefits of liquid investments are apparent, there are downsides too. Illiquid investments often offer higher returns but require a longer maturity period.
Here are six types of liquid investments to consider based on your circumstances:
1.Cash
Cash is the most easily accessible and liquid asset. You can use it without needing to sell anything or pay any fees. Cash investments include regular savings accounts or term deposits offered by traditional banking institutions. However, the downside is that these investments generally have low returns, often less than 1%. Additionally, there’s the risk of inflation reducing the purchasing power of cash over time.
2.High-Interest Rate Savings Account:
Another safe and flexible option is a high-interest rate savings account. These accounts provide a stable return on your investment and are generally more accessible compared to fixed deposits. Keep in mind that some accounts may have restrictions based on age and minimum deposits, but lower interest rates often come with additional benefits.
3.Bonds:
Bonds act as loans, where companies or governments issue them to raise funds. The issuer promises to repay the borrowed money, along with interest, at a later date (maturity). There are various types of bonds, including government, municipal, corporate, and mortgage bonds. Government bonds are typically considered the safest, while corporate bonds carry more risk. In Malaysia, there are conventional and Islamic bonds, such as government securities, Bank Negara Papers, Cagamas Papers, Private Debt Securities (PDS), and Asset-Backed Securities (ABS).
4.ETFs (Exchange-Traded Funds):
ETFs are publicly traded funds that track specific markets. They are passively managed and offer inherent diversification, spreading the investor’s risk across a wide market. ETFs can be easily bought or sold during market hours with the click of a button, making them a fairly liquid investment. The only challenge may be the process of depositing and withdrawing funds from your brokerage account.
5.Stocks:
Stocks, like ETFs, can be easily bought and sold during market hours and sometimes even outside of market hours. However, stocks are generally more volatile compared to ETFs. When an investor needs to liquidate stocks urgently, there’s a higher chance of taking a loss if it’s not the right time to sell.
6.Money Market Account:
Money market funds (MMFs) are a reliable option for managing money, but they are often not well-known among Malaysians. MMFs specifically seek highly liquid short-term cash equivalents called “money market instruments.” These instruments must be supported by banks, making them low-risk investments with high-interest rates and no lock-in periods.
While liquid investments are important for budgeting, it’s also worth considering illiquid investments for long-term potential returns.
At RinggitMinded, we take pride in helping Malaysians enhance their financial understanding. As part of our commitment, we offer FREE LOANCHECK+ REPORT to help you understand your financial health.
Disclaimer: The information provided on RinggitMinded and its content is not intended as securities brokerage, investment, tax, accounting, or legal advice. It should not be considered as an offer or solicitation to sell or buy securities or as an endorsement, recommendation, or sponsorship of any company, security, or fund. The content on RinggitMinded is for general informational purposes only and does not constitute personalized investment advice or a solicitation for the purchase or sale of securities.
Search
Latest Posts
Popular Tags