At the beginning of the articles, I remind you that when analyzing each, you need to analyze both profitability and liquidity and reliability, and if any of these factors you do not notice, it is no longer an investment.
Investment liquidity is …
The ability to sell, turn into money, into a live cache, that what an investment actually is while it works.
For example, when investing in real estate, when buying an office to rent it out, in order to turn it into money you need to: terminate the lease with tenants, put up a property for sale, find a buyer, negotiate and sign contracts and only then you will receive money. Reliable at first glance, the investment was very illiquid.
Quick liquidity is …
When you have a short-term deposit with the possibility of terminating the contract at any time.
Always remember that initially illiquid investments at some point can always turn into liquid or very liquid ones to become illiquid for a number of reasons.
For example, you invested in a taxi company in your city where there was no taxi yet and planned to set up a business. After you sell it and return the investment with a profit. When you completed the arrangement of the business, a large taxi company came into your city and created a lot of competition for you. Your investment a month ago was more liquid, now it has become sharply less liquid.
Imagine … After half a year of fierce competition, and this is a large company, due to debts to banks, they go bankrupt, suspend their work, and leave the market. And here is a miracle! Your illiquid asset takes off to the level of super liquidity.
It’s a great art to find an illiquid investment and clearly understand the period when it will become liquid, and therefore more profitable. You always need to make investments at the bottom of the chart – then when they are illiquid, that is, they are not sold and they are ready to be sold cheaper than their real value.
It is very important analyze and correctly know the period when it will become liquid again. If you miscalculate with a term you will lose in profitability, due to the increase in term.
Or vice versa, today you are trying to sell a liquid investment at a higher price, but information appears that in a month it will become specifically illiquid. For example, you have land on the outskirts of a city for the construction of residential buildings, but you will find out that a garbage recycling plant is starting to be built nearby. In this case, you need to quickly reduce the price and sell more liquid today, it is possible to lose some of the profit, so that tomorrow you will not lose even more. You are reading one of three articles on investment indicators. At the beginning of each, I remind you that analyzing each investment you need to analyze all: profitability, liquidity and reliability, and if any of the factors you do not notice, it is no longer an investment.
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