What is the liquidity of the following assets?

Question

List them in decreasing order. (Most liquid to least liquid)

a) gold bars, b) A portfolio of diversified stocks c) checking account d) a house e) certificate of deposit f) savings account.

If you think any assets are equal liquidity, please explain why.

Which of the about would be the WORST store of value? Why?

Answer 1

c) in general a checking account is more liquid than a savings account because there is a little less hassle to removing your money from it.  If the government declares a bank holiday you may be out of luck.  It has happened in the past.

f)

e)

b) a portfolio of diversified stocks may not be all that liquid especially if the government shuts down the stock exchanges

a) gold bars under some circumstances might be more liquid than  stocks ie if the stock exchange is shut down

d)  houses are very illiquid

Worst store of value is a checking account.  Fees accrue every month and they generally do not pay interest.  Inflation is continually eroding their value.

Answer 2

Liquidity is the ability to turn an asset into cash quickly and cheaply see the link below for a definition.  So the most liquid asset on your list is 1) a checking account, followed by 2) a savings account, 3) a certificate of deposit, 4) a portfolio of stocks, 5) gold bars, and lastly, 6) a house.  Reasons: 1) a checking account can be used like cash at most stores with proper id and cashed at a large number of locations including ATMs; 2) a savings account can be immediately accessed by going to the bank that holds the account when they are open or via an ATM; 3) a CD is like a bank account, but involves penalties and cannot be accessed by ATM; 4) a stock portfolio can be sold within minutes but you will pay a commission, normally a fraction of 1%, and access to the cash usually involves a wire transfer or even slower transfer of funds; 5) selling gold bars is a very specialized transaction with a limited number of buyers and implies physical transfer of the assets, which takes time and a commission or discount of several percent for the buyers; and 6) selling a house is not a fast process; even if a willing buyer is standing in front of you (in reality this part of the process by itself takes several months) and closing escrow on a real estate deal is a long process, which normally takes 60 to 90 days as well as a 6% commission for the realtor plus other selling costs.

"Store of value" is not really the same as "liquidity".  If you equate the two, then a house is the worst store of value.