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Medium Liquidity Investments

You don't actually hear the term "medium liquidity" very often.  People usually just say something is highly liquid or illiquid.  But, we include the idea here in order to nail down the concept of investments being on a spectrum.

Assets with a medium level of liquidity can be converted to cash, but only at a fairly high cost.  Cost, in this case, can be financial (such as exit fees or penalties), effort (such as time to prepare, market and deliver a sale), or time (such as several weeks or months).

There are financial instruments that fit this, like annuities or other insurance contracts, whose cash value can't be accessed without incurring exit penalties.  Retirement assets can be the same way - if you try to access assets in, say a 401(k) or 403(b) before your retirement age, you'd pay taxes and a 10% penalty.  The government did this in order to reduce the liquidity of retirement plan assets... that is, to make them harder to access.

Other examples of assets in this category include musical instruments (like a vintage guitar or tube amp), art supplies (like photographic chemicals for film cameras or tiles for a ceramicist), or tools and equipment (such as a woodcarver's fine set of blades or a potter's wheel).  These have and retain value, but take time to sell. 



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