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If the money in your bank account always seems to be low, you may need to review your personal finances on a more regular basis.

Keeping a close eye on your spending, saving, and investing can provide a more accurate picture of where your money is going. It could help you understand what you’re doing right and what you might want to change, and keep you on track with short- and long-term financial goals.

That doesn’t mean a full-on personal financial review every day. And some categories (spending vs. saving, for example) might require more attention than others. Here’s a breakdown of how often a review might make sense.

Ways to Review Your Personal Finances

1. Tracking Spending

If the money from your paycheck seems to magically disappear soon after it lands in your checking account, it’s likely because you don’t have any type of budget in place. That means you haven’t set any priorities for where the money should go or any guidelines to follow.

Before putting together a budget, it can help to track what you spend money on. That includes everything from rent to groceries to prescriptions and subscriptions. To simplify the process, you might use a budgeting app that syncs with your accounts and automatically tracks and categorizes your spending.

Once you see how much you spend and on what, you can use that information to set up a basic budget. During this time, you may want to keep checking your spending at least weekly, to see if your expectations were realistic and if you’re staying on target.

2. Reviewing Your Budget

When you’re trying to get your finances under control, you might decide to review your budget monthly to be sure you’re following through on the plan or if it needs adjusting. This can also help you avoid budgeting mistakes. But there may come a time when you feel as though you’ve got a solid, doable strategy, and you can cut back on how often you check your stats.

Some people do an annual budget review using information from the past year to adjust for the year ahead. This might be part of a larger financial evaluation that includes checking their credit report.

Others are more comfortable with quarterly or semi-annual checkups so they can nimbly make changes as new expenses and life changes come up. Decide what time frame works best for you.

Recommended: How to Manage Your Money

3. Monitoring Savings

It can be tough to stay motivated to reach a savings goal, whether it’s putting aside money for a vacation, building an emergency fund, investing for the future in a retirement fund, or all of the above.

Just as reviewing your spending regularly may help you stay on track, checking our savings monthly or quarterly can reinforce the effort. It can be satisfying and rewarding to watch your bank balance increase. You might also want to look into opening a high-yield savings account so that your savings can grow and earn even more for you.

4. Following Investments

How often you check your investments depends on your personal preferences and what you’re comfortable with.

If your money is in an IRA or 401(k), it’s meant for the long haul — a retirement that could be decades away. A semi-annual or annual check-in could be enough to spot any concerning trends.

If you have money invested for mid-term goals (say five to seven years away), you may want to check in more frequently, say quarterly. This gives you the opportunity to rebalance your portfolio, either by selling investments or redirecting future investments, if necessary to stay on target for your goals.

5. Attending to Taxes

It’s easy to put off thinking about income taxes until it’s time to file, but this is another slice of financial planning that can benefit from a little more evaluation. And if you wait until you’re filling out tax forms, you may miss out on some savings.

Taxpayers usually have until the April 15 filing deadline to make tax-deductible contributions to a traditional IRA or 401(k) for the prior tax year.

But many tax strategies must be implemented by the end of the calendar year to have an impact on federal taxes, so November can be a good time to take a look at charitable contributions, converting money from a traditional IRA to a Roth account, making health savings account contributions, and using the money left in health savings and flexible savings accounts.

6. Evaluating Goals

When it comes to goal-setting, it may help to think in terms of big goals and little goals.

Big goals might be things like sending your kids to college, buying a home, or retiring to a beach house. Smaller goals might include paying down credit card debt or taking a special vacation.

Both types of goals may require regular evaluations and financial checkups — to see if you’re on track and determine if it’s still something you want. After all, circumstances and personal priorities can change.

But the check-in schedule might be different for big goals (once or twice a year could be enough) and small goals (monthly, combined with your budget once-over, may be more appropriate).

Life events — a new job or job loss, a baby, a move — also may trigger the need to reevaluate some goals, big and small. And you might want to do a review of all your goals whenever you achieve something on your list. Rejoice and then refocus!

Wrapping It All Up

If you’re doing lots of small check-ins throughout the year, it might not seem necessary to do one big annual personal finance review.

But a yearly evaluation offers the opportunity to pull everything together — all those separate slices — to see what’s working and what isn’t. It also may be a good time to make any necessary updates to insurance policies and other documents and to gather up the paperwork you’ll need to file your taxes.

And if you do your review in November or December, you can make some financial resolutions to keep you motivated through the new year.

The Takeaway

The frequency of financial reviews depends on your individual circumstances and financial goals, but there are some general guidelines to keep in mind.

Once you set up a budget, consider reviewing it monthly (at least at the beginning) to track spending, ensure you’re sticking to your plan, and identify any areas for adjustment. If you’re trying to get your finances under control, however, a weekly review can be beneficial.

To make sure your savings and investments are on target, you might check in on your savings accounts and non-retirement investments quarterly, and retirement accounts at least annually.
It’s also wise to conduct an annual comprehensive review of your financial plan. This gives you a chance to examine if the way you’re managing your money suits your needs and goals, or if it’s time to make some changes and perhaps update, consolidate, and automate some facets of your finances, or open new investment or bank accounts.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How do you evaluate your personal finances?

Evaluating personal finances involves assessing your income, expenses, debts, and savings. Start by tracking your monthly spending to identify areas of improvement. Next, calculate your net worth by subtracting liability (debts) from assets. You’ll also want to review your credit score and ensure you’re meeting financial goals like saving for emergencies or retirement. Regular financial check-ups can help you stay on track, make informed decisions, and adjust plans based on life changes or financial goals.

What is the 70/20/10 rule in personal finance?

The 70/20/10 rule suggests dividing your income into three parts: 70% for living expenses (both necessary and discretionary), 20% for savings and investments, and 10% for debt repayment and charitable donations. This rule helps ensure you cover essentials, build wealth, and manage debts while also giving back.

What Are the Four Pillars of Personal Finance?

The four pillars of personal finance are budgeting, saving, investing, and protection. Budgeting involves managing your income and expenses to live within your means. Saving is setting aside money for short- and long-term goals. Investing grows your wealth over time through stocks, bonds, and other assets. Protection includes insurance and emergency funds to safeguard against financial setbacks. Together, these pillars form a solid foundation for financial stability and security.

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Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBNK-Q225-088

Paying for college is one of the biggest expenses a parent plans for, and it can seem overwhelming. At times, you might find yourself saving up for your kid’s future education while also trying to save for your own retirement, fund a house down payment, and pay off your own debt.

With the average cost of college tuition and fees for the 2024-25 school year at $11,610 for public in-state students, $30,780 for public out-of-state students, and $43,350 for private school students, it’s no wonder parents are taking out loans to help pay for their child’s undergraduate education.

Parents can rely on both Parent PLUS Loans and private student loans to help pay for college. Keep reading to learn the differences between the two and how to determine which type of loan may be best for you.

What Are the Different Loans for College?

There are four types of federal Loans offered by the U.S. Department of Education:

•   Direct Subsidized Loans are loans offered directly to the student, where the interest on the loan is paid by the U.S. Department of Education while the student is in school and during a six-month grace period after graduation. Thus, they are subsidized.

•   Direct Unsubsidized Loans are also offered directly to the student, but the interest is not paid by the federal government and it accrues while the student is in school.

•   Direct PLUS Loans are loans for professional or graduate students, or for parents of undergraduate students.

•   Direct Consolidation Loans allow you to consolidate all federal loans into one loan with an interest rate that’s a weighted average of all your federal loans’ interest rates, rounded up to the nearest eighth of a percent.

The main difference between student loans offered to undergraduates and Direct PLUS Loans offered to parents is that certain Direct Loans (Direct Subsidized Loans) for undergraduates are awarded based on financial need, whereas PLUS Loans are not awarded based on financial need, but do require a credit check when applying.

In addition to federal loans, there are also private student loans available both for students and parents. Private student loans are loans from banks or private lenders, which set their own interest rates and terms.


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no required private parent student loans than Federal Parent PLUS Loans. Federal PLUS Loans also come with an origination fee.

What Can These Loans Be Used For?

When a student’s financial aid package and other sources of funding aren’t enough to cover the cost of college and other educational expenses, Parent PLUS Loans and private student loans can help fill in the gaps. They can be used to cover expenses like tuition, room and board, books, and other supplies related to the total cost of attendance.

While they can both be used to cover the same expenses, they each have different benefits and terms, so it’s worth considering your options as you determine how to pay for your child’s college education.

Parent PLUS Loans vs Private Student Loans Compared

Beyond the major difference that Parent PLUS Loans are federal student loans and private student loans are borrowed from individual lenders, there are other similarities and differences to consider.

Similarities

Here’s an overview of the major similarities between these two types of loans.

Primary Borrower

Both Parent PLUS Loans and private student loans can be borrowed by parents of undergraduate students to help them pay for their education. On both a Parent PLUS Loan and a private student loan borrowed by a parent, the parent will be considered the primary borrower on the loan.

Interest Accrual

While the application processes for these loans will be different, both loan types will accrue interest. The interest rates for Parent PLUS Loans are set annually by congress. Interest rates on private student loans are set by the lender based on factors including the applicant’s credit score, income, and financial history, among other factors.

Loan Disbursement

Regardless of loan type, most student loans are disbursed directly to the school where they pay for the cost of tuition and room and board. Any leftover money from Parent PLUS Loans is given to the parent, not the student.

Differences

Here’s an overview of the major differences between Parent PLUS Loans and private student loans.

Application Process

One of the major differences between these loans is the application process. Because Parent PLUS Loans are a type of federal student loan, students must first fill out the FAFSA®. Then, parents are able to apply for a Parent PLUS Loan through the Federal Student Aid website.

Private student loans are administered by private lenders. To apply for a private student loan, parents will need to review the application requirements at their chosen lender.

Recommended: FAFSA Guide

Interest Rate

While both PLUS Loans and private student loans will require a credit check during the application process, it will not impact the interest rate available for PLUS Loans. Applicants with a strong credit history could potentially qualify for a more competitive interest rate with a private student loan than with a Parent PLUS Loan, which, as mentioned, has an interest rate that is set annually by Congress.

Repayment Plans

Parent PLUS Loans are eligible for federal repayment plans. The repayment plan for a private student loan will be set by the lender.

Pros and Cons of Parent PLUS Loans

Parent PLUS Loans can help parents finance their child’s college education when other aid options fall short. However, it’s important to weigh the advantages and disadvantages before committing to this type of federal loan.

Pros of a Parent PLUS Loan

From high borrowing limits to flexible repayment options, these federal loans provide key advantages for parents who qualify. Pros of Parent PLUS Loans include:

•   High borrowing limit: Parents can borrow up to the full cost of attendance (minus other financial aid), making it easier to cover tuition, housing, and other college expenses.

•   Fixed interest rate: These loans come with a fixed interest rate set by the federal government, providing predictable monthly payments.

•   Flexible repayment options: Repayment plans, including Income-Contingent Repayment (ICR) when consolidated, can help make monthly payments more manageable.

•   Deferment while student is in school: Parents can defer loan payments while their child is enrolled at least half-time, easing financial pressure.

•   Federal loan protections: Parent PLUS Loans are eligible for certain federal protections, like deferment, forbearance, and potential loan forgiveness under specific programs.

Cons of a Parent PLUS Loan

While Parent PLUS Loans can help families bridge the financial gap in paying for college, they also come with several drawbacks that are important to consider. Cons of Parent PLUS Loans include:

•  Credit check required: Unlike most federal student loans, Parent PLUS Loans require a credit check, which may limit eligibility for some borrowers.

•  Higher interest rates and fees: These loans typically have higher interest rates and origination fees compared to other federal student loans.

•  Parents are solely responsible: The parent, not the student, is legally responsible for repaying the loan, which could impact the parent’s long-term financial goals.

•  Limited income-driven repayment options: Parent PLUS Loans don’t qualify for most income-driven repayment plans unless they are consolidated into a Direct Consolidation Loan.

•  No subsidized interest: Interest accrues from the time the loan is disbursed, even if payments are deferred while the student is in school.

Pros and Cons of Private Student Loans

Private student loans can be a helpful resource when federal aid and other funding sources fall short. However, it’s important to weigh both the benefits and drawbacks before deciding if a private loan is the right choice for your college financing needs.

Pros of Private Student Loans

Here are some potential benefits of private student loans to consider:

•  Higher borrowing limits: Private lenders may allow you to borrow up to the full cost of attendance, helping to bridge large funding gaps.

•  Competitive interest rates: Borrowers with strong credit — or a creditworthy cosigner — may qualify for lower interest rates than those offered by federal loans.

•  Flexible loan terms: Private lenders often provide a range of repayment terms, allowing you to choose a plan that fits your financial goals.

•  Fast approval process: Many private student loans offer quick application and approval timelines, which can be helpful for meeting urgent tuition deadlines.

•  Choice of fixed or variable rates: Borrowers can typically choose between fixed rates for stability or variable rates for potential savings if interest rates drop.

Cons of Private Student Loans

While private student loans can help fill funding gaps, they also come with potential drawbacks that are important to understand before borrowing. These include:

•  No federal protections: Private loans do not offer income-driven repayment plans, federal forbearance, or loan forgiveness programs.

•  Credit and cosigner requirements: Approval often depends on the borrower’s or cosigner’s credit history, which can be a barrier for some students.

•  Variable interest rates: Some loans come with variable interest rates that can increase over time, making payments less predictable.

•  Limited repayment flexibility: Repayment terms are set by the lender and may not offer as much flexibility if financial circumstances change.

•  Interest accrual during school: Unlike subsidized federal loans, interest on private student loans often begins accruing as soon as the funds are disbursed.

The chart below illustrates some more general comparisons between Parent PLUS Loans and private parent student loans:

The Takeaway

Choosing between Parent PLUS Loans and private parent student loans depends on your financial situation and priorities. Parent PLUS Loans, as federal loans, offer fixed interest rates and access to federal repayment plans, including options for deferment and forbearance. However, they come with origination fees and may have higher interest rates compared to some private loans.

On the other hand, private parent student loans, offered by private lenders, may provide lower interest rates for borrowers with strong credit profiles and often have no origination fees. Nevertheless, they lack the flexible repayment options and protections associated with federal loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Can Parent PLUS Loans be forgiven?

Parent PLUS Loans can be forgiven through certain federal programs, such as Public Service Loan Forgiveness (PSLF), but only after the loans are consolidated into a Direct Consolidation Loan. Eligibility requires meeting specific criteria, including working for a qualifying employer and making 120 qualifying payments under an eligible repayment plan.

Can a student pay off a Parent PLUS Loan?

Yes, a student can help pay off a Parent PLUS Loan, even though the parent is legally responsible for repayment. Families can arrange informal agreements where the student makes payments directly to the loan servicer or reimburses the parent, but the loan remains in the parent’s name and credit history.

Is a Parent PLUS Loan considered a federal student loan?

Yes, a Parent PLUS Loan is considered a federal student loan. It is offered through the U.S. Department of Education to help parents pay for their child’s college education. Unlike federal student loans for students, Parent PLUS Loans require a credit check and are solely the responsibility of the parent borrower.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q225-049

Liquidity in stocks generally refers to how quickly an investment can be bought or sold and converted into cash. The easier an investment is to sell, the more liquid it is. Plus, liquid investments generally do not charge large fees when you need to access your money.

For the average investor, liquidity is an important consideration when building a portfolio, as it’s an indicator of how easy it is to access their savings. That can be important to know and understand when sizing up your overall strategy.

Types of Liquidity

Liquidity comes in two forms: Market liquidity and accounting liquidity. Here’s how the two are different.

Market Liquidity

Market liquidity refers to how quickly a stock can be turned into cash. High market liquidity means there’s a high supply and demand for an asset. That, in turn, makes it easy for buyers to find sellers and vice versa. As a result, transactions can be completed quickly, even when stock values are dropping.

Accounting Liquidity

Accounting liquidity is related to an individual’s or company’s ability to meet their financial obligations, such as regular bills or debt payments.

For an individual, being liquid means they have enough cash or marketable assets (such as stocks) on hand to meet their obligations.

Companies measure liquidity slightly differently by comparing current assets and debt. In addition to cash and marketable assets, current assets also include inventories and accounts receivable, the money customers owe on credit for goods or services they’ve purchased.

Investors may pay attention to company liquidity if they are researching that company’s stock as a potential buy. Companies with higher liquidity may be in better shape than those in risk of defaulting on their debt.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

How Liquid Are Different Assets?

An investor’s financial portfolio may be made up of a number of different assets of varying liquidities, including cash, stocks, bonds, real estate, and savings vehicles like certificates of deposit (CDs). Cash is the most liquid asset; there is nothing an investor needs to do to convert it into spendable currency.

On the other hand, an investment property is an example of a relatively illiquid asset, as it might take a long time for an investor to sell it should they need access to their money.

CDs are also relatively illiquid assets because they require investors to tie up their money for a preset period of time in exchange for higher interest rates than those available in regular savings accounts. Individuals who need their money early may have to pay hefty fines to access it.

Stocks generally fall on the relatively liquid side of the liquidity spectrum. Stocks that are easy to buy and sell and said to be highly liquid. Stocks with low liquidity may be tougher to sell, and investors may take a bigger financial hit as they seek buyers.

What Is Liquidity Risk?

Liquidity risk is the risk that an individual won’t be able to find a buyer or seller for assets they wish to trade during a given period of time, which can lead to adverse effects on the price. Liquidity risk is higher for complex investments or investment vehicles like CDs that may charge penalties to liquidate or access funds early.

Are Stocks a Liquid Asset?

For the most part, stocks that are traded on a public exchange are considered liquid assets. Some stocks, like those traded on foreign exchanges, may be less liquid as it takes more time to execute a trade.

Generally speaking, when an individual wishes to execute a trade, they use a brokerage account to issue a buy or sell order. The broker then helps match the individual with other buyers and sellers hoping to take the opposite action.

This process can take a little bit of time. Most stock trades settle within a two-day period. A stock trade executed on a Wednesday would typically settle on Friday. Settlement is the official transfer of stocks from a seller’s account to the buyer’s account, and cash from the buyer to the seller.

Because it can take some time for trades to be executed, there can be a difference in price between when an individual places an order and when that order is fulfilled.

How to Calculate a Stock’s Liquidity

One way to figure out a stock’s liquidity is by looking at a metric known as share turnover. This financial ratio compares the volume of shares traded and the number of outstanding shares. A stock’s volume is the number of shares that have been bought or sold over a given period. Outstanding shares refer to all of the shares held by a company’s shareholders.

Higher share turnover indicates high liquidity; investors have an easier time buying and selling. Investors might want to pay close attention to low share turnover, as this can indicate they may have a difficult time selling shares if they need to.

Another measure of a stock’s liquidity is the bid-ask spread. Bid price is the price an individual is willing to pay at a given point in time. The ask price is the price at which a buyer is willing to sell. The bid-ask spread is the difference between the two.

For highly liquid assets, the bid-ask spread tends to be pretty small — as little as a penny. This indicates that buyers and sellers are generally in agreement over what the price of a stock should be. However, as bid-ask spread grows, it is an indication that a stock is increasingly illiquid.

A wide spread can also indicate that a trade may be much more expensive to execute. For example, there may not be enough trade volume to execute an entire order at one price. If prices are rising, an order can become increasingly pricey.

💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Examples of Liquid Stocks

The most liquid stocks tend to be those that receive the most interest from investors. The large companies that are tracked by the S&P 500 Index.

Why Stock Liquidity Is Important for Investors

The relative liquidity provided by stocks can be a boon to investors. Stocks help provide the growth needed for investors to meet their savings goals. They are also relatively easy to buy and sell on the market, allowing investors to access their savings quickly when they need it.

The Takeaway

Liquidity is a measure of the ability to turn assets into cash without losing value. So it’s an important metric for investors to pay attention to as they construct their portfolios. But liquidity is just one of many factors to consider when investing.

Investors may want to know how liquid their holdings are so that they can choose the appropriate mix of investments that align with their risk tolerance. It may be comforting to some to know that they can sell investments with relative ease, rather than have their money tied up for the long-term.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

What is good liquidity for a stock?

Good liquidity for a stock refers to an investor’s ability to sell the stock in exchange for cash. If a stock is liquid, then it should be relatively easy to sell. If a stock is illiquid, or has bad liquidity, it may be more difficult.

What is a “Liquidity Ratio?”

A liquidity ratio is a financial ratio that can help an investor determine a company’s ability to pay off its debt obligations, particularly in the short-term. There are several liquidity ratios that can be utilized.

Is a higher liquidity better?

Generally, yes, a higher liquidity is better for investors, as it can signal that a company is performing well, and that its stock is in demand. It can also be easier for an investor to sell that stock in exchange for cash.

Photo credit: iStock/insta_photos