Investments like purchasing a property are great! But what’s not so great is the process and the time it takes to make that investment yours.
Fortunately, liquid investing can help counter this issue. It presents the opportunity to build your wealth while keeping your funds easily accessible.
What are liquid investments?
It is, at its core, a digital currency, or virtual money. It is also a decentralised asset in that it does not have any ties to traditional banks, financial institutions, or currencies. It means that you can transfer money to someone else without having to go through intermediaries (e.g. It doesn’t have to go through any intermediaries (e.g. banks).
There will be many companies accepting certain cryptocurrencies for payment in 2021 (e.g. You can either buy it as an investment or accept payments from Microsoft, Paypal, Starbucks. Recently, El Salvador adopted Bitcoin as its legal tender.
This asset has seen an exponential increase in demand over the last few years. Is that enough to justify an investment decision?
6 types of liquid investments
What is the most liquid asset of our time? Cash.
It doesn’t matter if you sell or borrow cash.
Cash investments can be made by banking with regular savings accounts, term deposits or traditional banks.
It is not possible to make any money from these investments. Even if you do make a profit, it is often less than 1%. Even if you live for 200 years, it’s not going to make your life easy.
You’ll also findInflation risk. You might be able to buy a pack Nasi Lemak for one ringgit today, but that may not be the case five years from now.
2. High-interest rate savings account
Another safe and flexible option is a high-interest rate savings account. These accounts give you a stable return on your investment and are mostly accessible, as opposed to fixed deposits.
Bear in mind as well that there may be restrictions such as your age and minimum deposits when you’re looking for the account with the highest interest rates. At the same time, a lower interest rate often comes with other benefits.
Bonds function as a form of loan. For instance, when a company or government needs cash, they have the option to issue bonds to finance the loan. The bonds give them a certain amount of money which they need to pay back at a later date (maturity).
There are several types of bonds, including government, municipal, corporate, and mortgage. As a rule of thumb, government bonds are considered the safest while corporate bonds are considered the riskiest.
In the Malaysian bond market, there are conventional and Islamic papers ranging from Government securities, Bank Negara Papers, Cagamas Papers, Private Debt Securities (PDS), and Asset-Backed Securities (ABS).
What are the risks of buying cryptocurrencies?
ETFs orExchange-Traded FondsThese funds are publicly traded and track a particular market. They are passively managed, rather than actively managed. They are also inherently diverse.Distributing investor risks and allowing exposure to wide markets.
Today’s technology makes it easy to buy and sell ETFs in market openings with just one click. This makes them a very liquid investment. You might have trouble withdrawing or depositing funds from your brokerage account.
6. Money market account
Money market funds (MMFsAlthough most Malaysians don’t know about these funds, they are a reliable option for managing money. MMFs are funds that target highly liquid, short-term cash equivalents. Also known as “money market instrument”, they seek out these instruments. All of these instruments must beIt is supported by banks which means it has a low risk.You will receive high interest rates and no lock-in period.
Although liquid investments are important in one’s budget, you should also consider illiquid investments for the long-term as they provide higher potential returns.
Meanwhile, if you’re thinking of investing in stocks in the near future, here’s a quick guide on the basics: