Describes the degree to which an asset can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets. It is safer to invest in liquid assets than illiquid ones because it is easier for an investor sell his/her investment. Examples of assets that are easily sold include blue chip and money market securities, because the market is huge with many buyers and sellers.