Illiquid Assets
It's not that illiquid investments have no value. They could be quite valuable. Worth millions even. But, illiquid assets cannot be converted easily into cash. This could be a good or a bad thing. If you need to get access to cash in a hurry, illiquid assets won't help you. On the other hand, if an asset is locked away, then you can't get at it, so it might grow. Plus, you won't be able to spend it on things like fancy vacations or cars (by the way, your cars isn't an investment... it's an expense... the cost of transportation).
Examples of Illiquid Investments:
Real Estate - This is one of the most well-known and widely-owned illiquid assets. Sure, for a brief period before the crash of 2008, people were buying and selling houses in a matter of months, even weeks. This was an anomaly. If you are lucky enough to own a place to live, you should not think of it as an investment that you could tap into easily, should you ever need cash. It is your place to live, and it will take time, in most cases a year or more, to prepare, market, and close on the sale.
Private Business Ownership - Sounds good, doesn't it? Ownership, all or in part, of a private business? Well, it might be good, very good. Or it might be a headache or disaster. But it is unlikely that you'd be able to access cash in any business you own a piece of. Say you own 10% of your brother's construction company. Even if he's doing really well, do you think he has a ton of cash laying around so he can just give you your share when you need it? Another example is if you are one of five owners of an artist co-op. Might be good, but what if you begin to hate all of them after two years (I know this would never happen!) and want to move to another state? You could do it... it just might take time to get your cash. A lot of time.
Examples of Illiquid Investments:
Real Estate - This is one of the most well-known and widely-owned illiquid assets. Sure, for a brief period before the crash of 2008, people were buying and selling houses in a matter of months, even weeks. This was an anomaly. If you are lucky enough to own a place to live, you should not think of it as an investment that you could tap into easily, should you ever need cash. It is your place to live, and it will take time, in most cases a year or more, to prepare, market, and close on the sale.
Private Business Ownership - Sounds good, doesn't it? Ownership, all or in part, of a private business? Well, it might be good, very good. Or it might be a headache or disaster. But it is unlikely that you'd be able to access cash in any business you own a piece of. Say you own 10% of your brother's construction company. Even if he's doing really well, do you think he has a ton of cash laying around so he can just give you your share when you need it? Another example is if you are one of five owners of an artist co-op. Might be good, but what if you begin to hate all of them after two years (I know this would never happen!) and want to move to another state? You could do it... it just might take time to get your cash. A lot of time.