What characterizes a liquid investment?

A liquid investment is characterized by its ability to be quickly converted into cash without significant loss of value. This is crucial for investors who may need to access their funds on short notice or who rely on liquidity for maintaining a flexible investment strategy.

When an investment is considered liquid, it means that there is a sufficient market for it, allowing for rapid transactions. Common examples include stocks traded on major exchanges or current assets like cash and cash equivalents.

In contrast, investments that are long-term commitments may not offer the same level of liquidity, as they usually require a holding period before significant returns can be realized. Additionally, while some investments can be high-risk, liquidity relates more to the speed and ease of selling an investment rather than its potential risk level or growth characteristic. Thus, the defining feature of liquidity is indeed the ease with which an investment can be sold for cash, making the provided answer the most accurate choice.