People not perfection
Loc: Right where I should be
|Posted: 2/18/2013 9:47:56 PM|
My dh were having this conversation tonight and we had a difference of opinion. Are stocks considered a liquid asset if they can be sold with profit? TIA
Make a Wish
Loc: Bangalore, India
|Posted: 2/18/2013 10:28:33 PM|
I wouldn't consider them liquid. When I think I liquid assets I think of safer, more conservative investments. If I needed money, I could sell and wouldn't have to take a loss. Just because you can sell them at a profit now, doesn't mean you'll be able to a year from now.
Loc: Denver, CO
|Posted: 2/18/2013 10:44:07 PM|
Yes, for the most part stocks are considered liquid. If you are talking "regular" stocks like Apple, Microsoft, etc....
You can sell them and get your money within 4 days if you need to.
An non-liquid stock would be something that doesn't trade anymore, or has such low volume that you can't get out. As an example, if you own 100,000 shares of XYZ and it only trades 200 shares per day I would consider that a non-liquid stock.
When we run a financial plan, I always consider stocks liquid.
ETA: ExPat....Although I hear what you are saying the "profitability" doesn't come into play when determining the "liquidity" from a financial planning point of view.
boring + nerdy
|Posted: 2/18/2013 11:14:01 PM|
Liquid assets are cash and cash equivalents.
Normal publicly traded stocks can be converted to cash at any point, so generally are considered liquid.
Loc: Queen Anne Hill
|Posted: 2/18/2013 11:16:49 PM|
Loc: Melbourne Australia
|Posted: 2/19/2013 1:42:13 AM|
Yep, liquid I would say.
As another poster said profitability doesn't come into it. Doesn't matter if you sell an asset at a profit or loss, it is how quickly it can be sold that determines its liquidity.
|Posted: 2/19/2013 10:21:31 AM|
Actually it depends on the stock. I'm sure the above posters assume you mean stock in public company that is traded on one of the major exchanges. In that case, absolutely. However stock in a private company, or restricted stock can be illiquid. It wholly depends on the ability to convert to cash. Per the IRS:
Liquidity is the ability to quickly convert property to cash or pay
a liability. Said another way, Liquidity is the ability to readily convert an asset, business, business ownership interest or security into cash without significant loss of principal.
Shares of Microsoft, for example, can be easily and quickly converted to cash with little loss of principal and would therefore be liquid.
There's actually quite a bit of tax law regarding liquidity - or lack thereof. In gift and estate tax, you can adjust the value of an asset for lack of liquidity (as well as marketability, lack control, etc.) Stock (a minority interest) in a privately held company, particularly where there are limits to who you can sell to - combined discounts can exceed 40%
Doxie Pea Mom
|Posted: 2/19/2013 10:48:21 AM|
A non-liquid asset would be property (house), an item that is not easily converted into cash.
Loc: Denver, CO
|Posted: 2/19/2013 11:32:12 AM|So who won?
|Posted: 2/19/2013 11:44:05 AM|Oops, I thought you meant chicken, beef or veggie. Yes, they are a "liquid" asset. So are broths.
Old Dogs are Best!
Loc: With my dogs
|Posted: 2/19/2013 12:44:23 PM|
Liquid = easy access, not hassle to gain access to the funds to move or to withdrawal and use.
A savings account is MORE liquid than a CD.
Stocks... Usually takes time to sell before you get your money/cash.
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