More than a decade ago, I took a business class, which was called BAD 201 (yes, it was that bad), and in that class the instructor made a statement that I was not able to forget: “The most liquid thing on earth is money and the most liquid money is the USD”. Yes, it’s the USD you have in your pocket to buy food, the USD you have in your bank account to buy a house, the USD you get by exchanging some of your local currency into the mighty dollars. Money is more liquid than gold (that’s why the USD is here to stay), and definitely more liquid than stocks.

I guess by now you understand that liquidity is not, as programmers say, a boolean, it’s not that something is either liquid or non-liquid, liquidity is a factor, something can be less liquid or more liquid than something else, but nothing (at least at the international level) is more liquid than money, and in particular the USD. Liquidity is simply how easy you can exchange the thing that you have for other things (yes, in essence we are all still doing bartering).

Now that we’ve established that liquidity is a factor, we can say that stocks are liquid, but how liquid are they? Well, that depends on the stock. For example, BAC and C stocks are extremely liquid, the second you want to sell these stocks at market price you will find not just one, but many buyers, and that’s why buy and sell transactions of such stocks are instantaneous. Other stocks, such as BIOS for example, are less liquid, sometimes it takes like 20 minutes to find a buyer, but you will still find a buyer. So it’s not like they’re not liquid, but they are certainly less liquid than BAC or C. Generally, stocks that have a high volume (more than 1 million shares/trading day) are very liquid, other than that you may experience some delays selling your shares.

Now there’s another problem with undermines the liquidity of stocks, is that you can’t sell them on holidays, on weekends, or after hours. Another thing is that you have to wait after selling a few days for the money to be transferred to your account. Compared to money, this is hardly liquid, but compared to other transactions, such as selling a real estate which may take several months, it is very liquid.