Investment Liquidity Analysis – THREE FREE SAMPLES

# 1 / Conservative Portfolio Scenario

Scenario Description

Margaret, a 62-year-old retiree, maintains a $500,000 conservative portfolio focused on capital preservation and income generation. Her primary concerns include maintaining easy access to funds for healthcare expenses and living costs while preserving purchasing power. She requires monthly withdrawals of $2,000 and wants to maintain a 6-month emergency fund readily available.

Portfolio Composition

  • Cash & Money Market Funds: $75,000 (15%)
  • Government Bonds (1-5 years): $200,000 (40%)
  • High-Grade Corporate Bonds: $150,000 (30%)
  • Dividend-Paying Blue-Chip Stocks: $50,000 (10%)
  • REITs: $25,000 (5%)

Liquidity Analysis & Calculations

Highly Liquid Assets (Available within 24 hours):

  • Cash & Money Market: $75,000
  • Percentage of total portfolio: 15%

Moderately Liquid Assets (Available within 1-3 days):

  • Government Bonds: $200,000
  • Corporate Bonds: $150,000
  • Blue-Chip Stocks: $50,000
  • Total: $400,000 (80%)

Lower Liquidity Assets (Available within 1-2 weeks):

  • REITs: $25,000 (5%)

Liquidity Stress Test:

  • Emergency fund requirement: $12,000 (6 months × $2,000)
  • Available highly liquid funds: $75,000
  • Coverage ratio: 6.25x (Excellent)

Transaction Cost Analysis:

  • Cash/Money Market: 0% transaction cost
  • Government Bonds: 0.1% average bid-ask spread
  • Corporate Bonds: 0.3% average bid-ask spread
  • Blue-Chip Stocks: 0.05% average bid-ask spread
  • REITs: 0.2% average bid-ask spread

Weighted Average Liquidity Cost: 0.18%

Conclusion

Margaret’s conservative portfolio demonstrates excellent liquidity management with 95% of assets accessible within three days and minimal transaction costs. The substantial cash position provides a strong buffer for emergencies and regular withdrawals. The liquidity profile aligns perfectly with her risk tolerance and income needs, though the high cash allocation may limit long-term growth potential.

 

Liquidity Score: 9/10 – Excellent liquidity with very low risk of forced selling at unfavorable prices.

 

Disclaimer: This is a sample analysis created for educational purposes only to demonstrate conservative liquidity analysis scenarios and further illustrate the concepts discussed in this blog article. This does not constitute personalized financial advice. Individual circumstances vary significantly, and readers should consult with qualified financial professionals before making investment decisions. Past performance does not guarantee future results, and all investments carry risk of loss.

# 2 / Balanced Portfolio Scenario

Scenario Description

David, a 45-year-old professional, manages a $750,000 balanced portfolio targeting moderate growth while maintaining reasonable liquidity for potential opportunities and emergencies. He has stable employment income and plans to retire in 20 years. His strategy balances growth potential with risk management, requiring access to funds for potential home upgrades and children’s education expenses.

Portfolio Composition

  • Cash & Short-Term Bonds: $60,000 (8%)
  • Government & Corporate Bonds: $180,000 (24%)
  • Large-Cap Stocks: $225,000 (30%)
  • Mid-Cap Stocks: $150,000 (20%)
  • International Stocks: $75,000 (10%)
  • REITs: $45,000 (6%)
  • Private Equity Fund: $15,000 (2%)

Liquidity Analysis & Calculations

Highly Liquid Assets (Available within 24 hours):

  • Cash & Short-Term Bonds: $60,000
  • Large-Cap Stocks: $225,000
  • Total: $285,000 (38%)

Moderately Liquid Assets (Available within 1-5 days):

  • Government & Corporate Bonds: $180,000
  • Mid-Cap Stocks: $150,000
  • International Stocks: $75,000
  • REITs: $45,000
  • Total: $450,000 (60%)

Illiquid Assets (Available within 5-10 years):

  • Private Equity Fund: $15,000 (2%)

Liquidity Stress Test:

  • Emergency fund target: $30,000 (4 months expenses)
  • Available highly liquid funds: $285,000
  • Coverage ratio: 9.5x (Excellent)

Market Stress Analysis: During market downturns (assuming 30% decline):

  • Highly liquid assets value: $199,500
  • Still exceeds emergency fund by 6.65x
  • Sufficient liquidity maintained during crisis

Transaction Cost Analysis:

  • Cash/Short-Term Bonds: 0.05%
  • Government/Corporate Bonds: 0.25%
  • Large-Cap Stocks: 0.08%
  • Mid-Cap Stocks: 0.15%
  • International Stocks: 0.20%
  • REITs: 0.30%
  • Private Equity: 5.00% (on rare liquidity events)

Weighted Average Liquidity Cost: 0.19%

Liquidity Efficiency Ratio:

  • Liquid assets / Total portfolio: 98%
  • Time to liquidate 50% of portfolio: 2-3 days
  • Time to liquidate 90% of portfolio: 1-2 weeks

 Conclusion

David’s balanced portfolio maintains strong liquidity while pursuing moderate growth objectives. The 38% allocation to highly liquid assets provides substantial flexibility for opportunities and emergencies. The small private equity allocation (2%) adds return potential without significantly compromising liquidity. The portfolio can weather market stress while maintaining access to funds, though transaction costs are slightly higher than conservative portfolios due to equity exposure.

 

Liquidity Score: 8/10 – Very good liquidity with balanced risk-return profile suitable for medium-term goals.

 

# 3 / Aggressive Portfolio Scenario

Scenario Description

Sarah, a 35-year-old tech entrepreneur, manages a $1,200,000 aggressive growth portfolio focused on maximizing long-term returns. With high risk tolerance and 30-year investment horizon, she prioritizes growth over liquidity but maintains minimum liquidity for strategic opportunities and business investments. Her income is variable but substantial, and she has access to credit lines for short-term needs.

Portfolio Composition

  • Cash & Money Market: $48,000 (4%)
  • Government Bonds: $60,000 (5%)
  • Large-Cap Growth Stocks: $240,000 (20%)
  • Small-Cap Stocks: $180,000 (15%)
  • Emerging Market Stocks: $120,000 (10%)
  • Private Equity: $300,000 (25%)
  • Real Estate Partnerships: $144,000 (12%)
  • Venture Capital: $72,000 (6%)
  • Cryptocurrency: $36,000 (3%)

Liquidity Analysis & Calculations

Highly Liquid Assets (Available within 24 hours):

  • Cash & Money Market: $48,000
  • Large-Cap Growth Stocks: $240,000
  • Total: $288,000 (24%)

Moderately Liquid Assets (Available within 1-7 days):

  • Government Bonds: $60,000
  • Small-Cap Stocks: $180,000
  • Emerging Market Stocks: $120,000
  • Cryptocurrency: $36,000
  • Total: $396,000 (33%)

Low Liquidity Assets (Available within 1-6 months):

  • Real Estate Partnerships: $144,000 (12%)

Illiquid Assets (Available within 3-10 years):

  • Private Equity: $300,000 (25%)
  • Venture Capital: $72,000 (6%)
  • Total: $372,000 (31%)

Liquidity Stress Test:

  • Minimum emergency fund: $24,000 (3 months expenses)
  • Available highly liquid funds: $288,000
  • Coverage ratio: 12x (Excellent)

Opportunity Fund Analysis:

  • Target for strategic investments: $100,000
  • Available within 1 week: $684,000
  • Opportunity coverage: 6.84x (Excellent)

Transaction Cost Analysis:

  • Cash/Money Market: 0%
  • Government Bonds: 0.10%
  • Large-Cap Growth: 0.08%
  • Small-Cap Stocks: 0.35%
  • Emerging Markets: 0.50%
  • Private Equity: 8.00% (estimated on secondary market)
  • Real Estate: 3.00% (estimated transaction costs)
  • Venture Capital: 10.00% (estimated on secondary market)
  • Cryptocurrency: 0.25%

Weighted Average Liquidity Cost: 1.85%

Liquidity Risk Assessment:

  • Illiquid allocation: 31% (High but manageable)
  • Liquidity gap during stress: Minimal due to adequate liquid reserves
  • Time to liquidate 25% of portfolio: 1-2 days
  • Time to liquidate 50% of portfolio: 1-2 weeks
  • Time to liquidate 75% of portfolio: 6-12 months

Liquidity Efficiency Metrics:

  • Liquid assets coverage ratio: 2.4x annual expenses
  • Diversification across liquidity tiers: Well-distributed
  • Access to alternative liquidity: Credit lines available

 

Conclusion

Sarah’s aggressive portfolio sacrifices some liquidity for higher return potential, with 31% in illiquid investments. However, the 24% allocation to highly liquid assets provides adequate coverage for emergencies and opportunities. The higher transaction costs (1.85%) reflect the illiquid nature of alternative investments, but the portfolio maintains sufficient flexibility for a growth-focused strategy. The substantial illiquid allocation requires careful monitoring and may limit response to short-term opportunities.

 

Liquidity Score: 6/10 – Adequate liquidity for aggressive growth strategy, with acceptable trade-offs between accessibility and return potential.

To explore other topics of this blog, please check our HOMEPAGE and SUBSCRIBE to our NEWSLETTER & FREE “SMART INVESTING GUIDE”

  

 

Disclaimer: This is a sample analysis created for educational purposes only to demonstrate conservative liquidity analysis scenarios and further illustrate the concepts discussed in this blog article. This does not constitute personalized financial advice. Individual circumstances vary significantly, and readers should consult with qualified financial professionals before making investment decisions. Past performance does not guarantee future results, and all investments carry risk of loss.