Why is liquidity important in investment products?

Liquidity is crucial in investment products primarily because it allows investors to quickly access their capital when needed. This characteristic is particularly important for individuals who may have unexpected expenses or financial emergencies, as being able to convert investments into cash swiftly without significant loss in value provides financial security and flexibility.

When an investment is liquid, it means that there is enough market activity so that the asset can be sold without a noticeable impact on its price. This is essential for maintaining an efficient cash flow, especially for investors who need to manage their cash reserves actively or for those who may need to pivot their investment strategy in response to changing market conditions.

The other options relate to aspects of investment products but don't capture the primary importance of liquidity. For instance, while the idea of ensuring high returns can be appealing, it doesn't inherently connect to the ability to access funds when necessary. Higher risks might be associated with certain investments, but liquidity itself is about how easily assets can be converted to cash, not about risk. Additionally, the concept of guaranteed constant market prices does not pertain to liquidity, as market prices fluctuate based on demand and supply, and liquidity impacts how quickly and efficiently an investor can exit a position.