Long-Term Investing Still Requires Liquidity for Near-Term Expenses
Intending to invest for the long term differs from being able to leave money invested. Check liquidity by matching spending dates with sale, settlement, and currency conversion timelines.
Your investment horizon is how long you can wait before using the money, while liquidity is the ability to turn assets into cash on reasonable terms when needed. Declaring yourself a long-term investor does not prevent a near-term expense from shortening your actual horizon. Before assessing prospective returns, check whether spending dates align with the steps required to sell and withdraw funds.
Build a calendar of interim expenses before focusing on the final goal
Even with a distant goal such as retirement, housing costs, medical expenses, and debt repayments can arise along the way. List expected spending by date and assign assets to each expense. Treating all assets as long-term investments without setting aside living expenses increases the likelihood of selling during a downturn. Also record whether the spending date can move or the amount can be reduced, so you can assess how flexible your investment horizon actually is.
A trading button does not mean cash is available
Even listed assets can have low trading volume, allowing a large order to move the price. Settlement and withdrawal take time after a sale executes, and foreign assets may involve additional market holidays and currency conversion procedures. Funds have a gap between redemption requests and payment, with restrictions varying by product. Rather than applying a universal timeline, check actual schedules in the latest product documents and brokerage guidance for your holdings.
A long holding period does not solve every risk
Allowing plenty of time does not automatically eliminate individual company failures or problems in a fund's structure. Long-term investing provides time to wait; it does not guarantee the outcome. When an illiquid asset offers a high expected return, check the restrictions on accessing your money in exchange. Calculating an emergency sale price reveals the difference between normal market valuations and cash you could actually use.
When calculating available cash, distinguish placing a sell order from an actual fill. If a limit order remains unfilled because its price was not reached, the funding for the expense has not yet been secured. If you plan to sell several assets in sequence, record how a delay in the first sale would affect the later schedule. Checking whether you can trial a withdrawal in time for the planned date can reveal operational gaps that expected-return calculations struggle to identify.
Worked example
Hypothetical example: You need KRW 15 million for a housing deposit in 8 months, but have KRW 5 million in cash and stocks worth KRW 20 million. If the stocks fall 30%, their value drops to KRW 14 million. To raise the KRW 10 million cash shortfall, you must sell approximately 71.43% of the stock holdings. Even with a 5-year holding plan, an earlier expense forces you to sell most of the position early. Selling costs and settlement delays must be added to this calculation.
What to check
- Have you assigned assets to each near-term expense?
- Have you confirmed when sale proceeds can actually be withdrawn?
- Have you accounted for market holidays and currency conversion time?
- Have you calculated the share of holdings you would need to sell after a sharp decline?
Sources and primary materials
This is educational material about research methods. For an actual company decision, verify the filings and primary sources for the relevant period.