Liquidity Constraints to Investment Portfolio Management
Liquidity requirements are any need for cash in excess of the amount being saved (or contributed in the case of endowments or pension plans) in a given year. Liquidity requirements usually stem from liquidity events.
Liquidity events may be planned for, such as a child’s education. They may also be unplanned, such as a medical emergency. In either case they require a portfolio allocation to assets that can be readily converted into cash without impacting their value.
In some cases, liquidity requirements can also be met by using derivatives or insurance products.
For more information, see all articles on: FInancial Planning, Portfolio Management See also:
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)