Our recent CommonCents Money Matters webinar shed light on hidden investment risks, and today we’re tackling liquidity risk.
It’s a big deal for everyday households, especially retirees, and we’re here to help you understand how to keep your finances flexible and stress-free.
What is Liquidity Risk?
Liquidity is about how fast you can turn investments into cash.
Shares are super liquid—sell today, get cash in days.
Property? Not so much. Selling a home or commercial property can take months, leaving you stuck if you need money fast.
Liquidity risk hits when your asset is tied up and life throws a curveball.
Why it matters
Imagine you’re retired, with no salary, and your portfolio is heavy in property.
A $50,000 emergency—say, a car replacement or home repairs—comes up. If your money’s locked in illiquid assets like real estate or a five-year term deposit, you’re in a bind.
Banks rarely lend to retirees without income, making access even tougher.
We’ve seen clients face this stress, and it’s no fun!
Plan ahead
Match investments to your needs in the near and far future.
For short-term (next 2 years), keep cash handy—say, $120,000 for $60,000 annual expenses—in accounts or funds you can tap in 7-14 days.
Medium-term needs (2-5 years) suit fixed interest options.
Long-term? Go for growth assets like shares to beat inflation.
Have a Plan B and C—enough liquid funds for 2-4 years of emergencies – like a pandemic or market dip – keeps you secure.
Liquidity risk won’t make the evening news, but it can spike your stress if you’re unprepared.
You can handle this!
Assess your short, medium, and long-term needs, balance your portfolio, and then consult a planner.
Build a flexible financial plan so your money’s there when your family needs it most!
