Question

Suppose you are newly appointed investment officer and you have your first meeting with you client who is interested to invest his money. How will you tackle him by explaining about both liquid and illiquid investments? Moreover, which assets class will you suggest him he may consider specifically at this time of pandemic when whole economy and stock markets are devastated?

Answer 1

At time of pandemic , liquidity is very important.

Liquid asset are those which can be converted into cash quickly. For example shares of listed company , gold , etc

Illiquid asset are those which cannot be converted into cash quickly. For example shares of unlisted company ,fixed asset i.e building , etc

At time of pandemic, investing environment is uncertain , if one invest in illiquid asset and suddenly any unfavourable evene occurs than the investor is left with no choice except to hold the asset. In such cases holding period can be 5 years to even 10 years. Thus it is better to invest in liquid assets

Gold is considered as safe heaven as it is universally accepted and is highly liquid asset. Thus when whole economy and stock markets are devastated it is better to invest in gold