Money in the Bank

Bank savings have very high liquidity and safe returns.

Liquidity is the ease with which an asset can be converted to cash. Other than cash in your wallet, the most liquid investment is bank savings. Shares (or stocks, although I will continue to call them shares in future) are very liquid, or easy to sell and convert to cash, and real estate is generally perceived to be relatively illiquid. Defining your investment time frame will help minimise liquidity risk, the risk of you needing to cash out of your investment and not being able to do so. For example if you put all your savings into a house and then receive a series of unexpected bills, you may have to sell your house to get the cash to pay them, while if you had put the money in the bank you could have accessed it more easily.

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