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Personal Financial Planning, Fourth Edition by Wai Mun Fong, Benedict Koh

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4. Liquid Assets Management

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Introduction

Most of us hold liquid assets to meet our daily needs. Liquid assets are assets that can be readily converted into cash with minimal loss in value. Examples of liquid assets are cash, current account balances, savings deposits and time deposits of very short maturity.

As liquid assets possess many of the characteristics of cash, their returns are generally low. This means that the opportunity cost of holding large amounts of liquid assets is very high. By holding liquid assets, you are forgoing the opportunity to earn higher returns from other high-yield investment instruments. Therefore, the key objective ...

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