Liquidity refers to the ability of an asset to be easily bought or sold in the market without affecting the asset’s price. A liquid asset can be quickly converted into cash, typically with minimal loss of value. Liquidity is a crucial factor in investing as it affects the ability to access funds in an emergency or to take advantage of investment opportunities. Assets with high liquidity, such as cash, money market funds, or highly traded stocks, can be bought or sold quickly and with minimal price impact. Assets with low liquidity, such as real estate or illiquid securities, may be difficult or time-consuming to sell and may be subject to significant price changes in the process. The level of liquidity needed depends on an investor’s goals and financial situation, and should be considered as part of an overall investment strategy.