This is Money Talks with Chad Olivier.
Sponsored by Olivier Group.
Hi, this is Chad Olivier, CEO and Certified Financial Planner with Olivier Group. When selecting an investment, most people focus on one question: What return could I earn? But there is another important question to consider: How accessible will my money be when I need it?
That is where liquidity comes in.
Liquidity describes how quickly an investment can generally be converted into cash without significantly affecting its price.
Publicly traded stocks and many bonds may usually be sold while the market is open. This gives investors flexibility when their needs or financial circumstances change.
However, not every investment provides that same level of access.
Some complicated investments sold to the public may have high fees, large commissions paid to the advisor, and surrender periods lasting ten years or longer. If you need your money during that period, you could face significant penalties or find that accessing it is difficult.
Unfortunately, many people are afraid to invest in stocks and bonds because they constantly hear that the markets are going up or down, but price movement does not automatically mean an investment is bad.
It reflects the market determining what buyers are willing to pay and sellers are willing to accept at that moment. One of the trade offs for liquidity is visible volatility. Because stocks and bonds trade regularly, you can see their changing values every day. That may feel uncomfortable, but it also provides transparency and the ability to make changes when appropriate. An investment that does not show daily price changes is not necessarily safer. Its volatility may simply be less visible and selling it could be difficult or expensive.
Before investing, understand what you are purchasing. Ask how quickly you can access your money, whether they are surrender charges or withdrawal penalties, and what fees and commissions are you paying, and how that investment is valued. You should also understand what may cause its value to rise or fall, and what should you do when that happens. The answer is usually not to panic whenever the market moves.
The goal is to understand what you own, why you own it, and how it fits into your overall financial plan. Liquidity gives you flexibility, volatility is part of investing. When you understand both, you may become a more informed and confident long term investor. Visit us at oliviergroup.com
and reach out to one of our certified financial planners. That’s why money talks, but planning pays.
This has been money talks with Chad Olivier.
