Cash To Digital Gold: 7 Ways To Liquidate Main Asset Classes

To need money and not have it is the worst nightmare. This is why is it crucial to invest as well as save from our regular income. Now, if you don’t have any savings, the only option is to borrow. But, if you do have savings or investments, it’s simply a question of which one to liquidate first.

How to Get Emergency Funds

There is no one particular source for emergency funds. It mostly depends on the situation and the amount of money you require.

For example, if you need funds urgently, you should opt for the most liquid asset. Generally, equity and mutual funds are among the most liquid assets, after cash, of course. Anything that can be sold instantly can be included here.

On the other hand, if time is not a constraint, then you should opt for the asset with the lowest return. Generally, fixed deposits and other fixed-income instruments fall under this category. These instruments are very safe but often take some time to liquidate.

Let’s go through how easy it is to liquidate the main asset classes.

Cash

This is fairly obvious. Cash is the most liquid asset. It is second to none in this regard.

Cryptocurrency

This might come as a surprise. But cryptocurrency trades on exchanges that are open 24*7 throughout the year. No other asset exchanges offer this kind of convenience.

Of course, there are other issues related to cryptocurrency investments. But liquidity is not one of them. You can buy and sell crypto at any time, from anywhere.

Equity

When it comes to more conventional financial assets, equity takes the crown. Stock exchanges are open from 9:15am to 3:30pm every weekday. You can buy and sell shares instantly during this time.

If you buy shares, it takes two days to get deposited into your account. But if you sell, you can get the investment amount back by the end of the day.

Stock exchanges lose out to cryptocurrency exchanges in terms of opening hours. The edge, however, lies in the fact that stock exchanges are regulated. The SEBI sets regulations and guidelines that stock exchanges have to follow. This ensures the investors’ interests are safeguarded and fiascos like the FTX collapse don’t happen.

Digital Gold

Digital gold can be bought and sold from banks, NBFCs and other investment platforms in India. This segment is partially regulated, although there are some laws in place. Digital gold gets stored in your virtual locker.

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Mutual Funds

Mutual funds are almost as liquid as shares. It takes a day for the investment amount to get transferred back into your account.

As mutual funds invest your money on your behalf, there is another layer to go through here. Once you place a redemption request, the mutual fund house has to adjust its portfolio to make the payout.

The entire process can be completed fairly easily though, through online applications.

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Fixed deposits

Fixed deposits are notoriously tricky to liquidate before maturity. Hence the name. It doesn’t matter that the rate of return is much lower. The lack of liquidity ties in with the fact that fixed deposits are some of the safest investment assets.

There is a penalty that you have to pay for premature withdrawal, along with some paperwork. Once completed, the money takes a few days to get deposited into your account.

Bonds

Bonds, too, are like fixed deposits. They are, in fact, the least liquid of the popular financial assets.

If you want to sell bonds before they mature, you can do so on the stock exchanges. But the issue is the low liquidity. If there is no one out there that wants to buy the bond, who will you sell to?

The Verdict

The first thing that you need to remember is to keep calm during emergencies. If you don’t have investments in these assets, please don’t worry. Any kind of asset can be liquidated — it's just a matter of knowing the process.

PRO TIP: Consider saving up an emergency fund. We never know what the future holds and when we might need money. If you have a backup for this exact reason, you will never have to think about liquidating your assets.