When you’re ready to invest your inheritance, what asset classes are worth considering? To answer this question, think back to the topic “Liquidity is an important financial concept.” This covered the concept of how quickly an investment can be converted into cash. The most liquid asset possible is cash: If you have all of your money in cash, you have all of your wealth in liquid resources. You can use this money right away to buy something, to pay for an emergency, or to take off on vacation – whatever you want to use the money on. Every investment has a different degree of liquidity, which means that it can be converted into cash quickly and easily (or not so much).
Liquidity is a very important aspect you must keep in mind when you’re considering an investment. Ask yourself these questions: Can I sell this investment and get my money quickly and easily? If yes, that’s always a good thing. If not, here’s the next question: Am I okay with that?
Here’s a short list of the investments that are out there and the liquidity of each:
- Stocks (very liquid)
- Bonds (very liquid)
- ETFs (very liquid)
- Cryptocurrencies (liquid)
- Real estate (less liquid)
- Venture capital (less liquid)
This list is of course very general, and there could always be exceptions. It’s possible for a specific property to be in high demand due to its location and price, making it very liquid.
Use your assets for your goals consciously
It’s worthwhile to pay close attention and use your inheritance consciously rather than taking a haphazard approach. Getting an inheritance can make you feel like you’ve just won the lottery, but achieving your personal financial goals always depends on what you do with it. The more money you inherit, the sooner you can become financially independent – but only if you have the necessary knowledge and discipline not to spend excessively and not to make poor investment decisions.