Which of the following best describes liquidity in mutual funds?

Liquidity in mutual funds fundamentally refers to how quickly investors can sell their shares and convert them into cash without significantly affecting the price. This concept is crucial because investors often value the ability to access their funds quickly, especially in times of financial need or when market conditions change.

Mutual funds typically offer daily liquidity, meaning that investors can process redemptions at the end of each trading day at the fund's net asset value (NAV). This feature distinguishes mutual funds from some other investment vehicles that may have longer redemption periods or restrictions.

The other options do not accurately capture the essence of liquidity. For instance, the ability to reduce assets pertains more to fund management strategies rather than the investor's capacity to access cash. The minimum investment period signifies a requirement for how long investments must be held, which is unrelated to liquidity. Lastly, expected returns are projections based on investment strategies and performance, not a measure of liquidity. Thus, the focus on how swiftly shares can be sold for cash effectively encapsulates what liquidity in mutual funds is all about.