Understanding Liquidity Risk

One of the often-overlooked investment risks is liquidity risk—the risk that you may need to access your money at a time when your investments are difficult to sell, or when selling them could result in losses or penalties. While many investors focus on returns and market volatility, not having enough liquidity in your portfolio can create significant stress, especially during emergencies, major life events, or market downturns.

At Optimize, we help you manage liquidity risk by ensuring your portfolio strikes the right balance between investments designed for long-term growth and those that offer ready access to funds when you need them.

What Is Liquidity Risk?

Liquidity risk occurs when you cannot access your money easily without incurring significant costs, delays, or losses. Some investments, like publicly traded stocks or bonds, are highly liquid—you can sell them quickly in most market conditions. Others, like real estate, private equity, or certain alternative investments, are illiquid—they can take months or even years to sell, or may involve penalties or unfavorable pricing if sold early.

Even in markets that are normally liquid, extreme events can create periods where selling becomes difficult or where prices fall sharply, forcing investors to accept steep losses to access cash.

Why Liquidity Risk Matters in Your Financial Life

Liquidity risk becomes a problem when you have short- or medium-term cash needs, but your money is tied up in investments that are hard to access. This can lead to scenarios where you are forced to sell long-term investments at the wrong time, potentially locking in losses or disrupting your investment plan.

For example, needing to access funds during a market downturn can result in selling investments at depressed prices. Or, if unexpected expenses arise—such as health emergencies, home repairs, or family obligations—you may find that the assets you thought were working for you are inaccessible when you need them most.

How Optimize Helps You Manage Liquidity Risk

At Optimize, we help you balance liquidity risk by designing portfolios that give you the flexibility to meet your cash needs while keeping the rest of your investments focused on your long-term goals.

• Our model portfolios offer weekly liquidity.
  We recognize that life does not wait for markets to be ideal. That is why our model portfolios are structured to provide weekly liquidity, allowing you to access your funds on a regular basis without having to wait weeks or months for redemption windows to open. This ensures that if you need to make withdrawals for planned expenses, emergencies, or lifestyle needs, your investments remain accessible in a timely and efficient way.

• Aligning investments to your time horizons.
  We carefully match your investments to your goals and when you expect to need the money, ensuring illiquid or less liquid investments are only used where appropriate and where the time horizon supports it.

• Maintaining separate cash reserves.
  For your immediate and near-term needs, we encourage keeping appropriate reserves in liquid accounts, separate from your long-term portfolio, so your strategy is not disrupted by unexpected short-term needs.

• Proactive liquidity conversations.
  Through regular reviews and planning discussions, we help you think through your upcoming cash flow needs, helping ensure you have access to liquidity when needed—without compromising your long-term investment strategy.

Liquidity Is Peace of Mind - Built into Every Portfolio

Liquidity risk is easy to overlook until you need cash and your investments cannot provide it. At Optimize, we make liquidity planning part of your overall investment approach, giving you the confidence that your portfolio not only supports your future goals, but is also flexible enough to support your life today.

By providing weekly liquidity in our model portfolios, combined with thoughtful portfolio design and ongoing coaching, we help you manage liquidity risk as part of a holistic, stress-free investment experience.