Rule #2: I Must Understand the Degree to Which My Investments Are Truly Liquid

When your investments are liquid, you have access to the money. Liquid generally means no less than “trade plus 3 days.” At any given time, you can call your advisor, make a sales transaction, and in 3 days you will have access to the funds. It’s not 3 weeks, it’s not “let me sign here and give you an I.O.U.,” and it’s not “I’ll call you when the money comes in.” It’s “trade plus 3 days.” The time frame can be even shorter. For example, cash in a money market account or a checking account generally is available immediately, without delay.

The rule that investments must be liquid won’t necessarily apply to everyone. Some people invest in artwork, commodities, private ...

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