Private Equity, literally private or unlisted Equity, consists of buying shares of unlisted companies. This investment is made directly or through companies or funds. As securities are not listed on the financial markets, it is often said that Private Equity makes it possible to invest in the so-called real economy. You want to invest your savings while having the possibility of withdrawing them at any time. Your banker talks to you about liquid investments. What is it about?
Liquidity: What Is It?
A financial asset (stocks, bonds, etc.) is said to be liquid when it can be bought or sold quickly without having a significant impact on its price. Liquidity, therefore, reflects the ease with which this asset can be traded. Thus, the more liquid a market, the easier, faster and more inexpensive it is to transact there. By extension, an investment in online sites like nyppex.com is said to be liquid when you can easily and quickly get your money back. In the case of Liquidity For Private Equity Funds, this is something that you need to comprehend.
Some Examples of Liquid and Illiquid Investments
The most liquid savings are those that remain in your checking account because it is effortless for you to withdraw them immediately and without charge. Savings placed in a passbook are also. On the contrary, equities listed on the growth market, a market intended to accommodate SMEs, are illiquid: we then speak of illiquid assets. Indeed, the number of buyers present on the market and the number of buy or sell orders are deficient. As a result, you may have trouble quickly finding people willing to buy your securities at the price you want. Moreover, in an illiquid market, prices can vary high.
What Do We Mean By “Liquidity Risk”?
When the liquidity risk is high, it means that the possibility that there will be no more buyers is high. In this case, the chances of finding a buyer for your securities at the desired price collapse. The seller in a hurry may be forced to sell his securities at a lower price in order to find a buyer. On the contrary, if the offer retracts, prices go up, and buyers must agree to pay more.
For your short-term investments in nyppex.com or those where you want to be able to get your money back quickly, it is best to choose liquid assets. So you can convert them immediately into currency without losing value.
