Cash
This isn't just the money in your pocket. It's also other "cash-equivalents," primarily highly-secure investments that can be readily converted into cash. These include your savings or chequing accounts, GICs, Treasury Bills and money market instruments (very secure, short-term, interest-paying investments).
Cash investments have the lowest risk, but they also have the least growth potential. So what are the advantages of cash investments?
- cash holdings maintain the safety of your principal (the money you invest)
- you are highly unlikely to lose money
- they offer a lot of liquidity (meaning you can get your money when you need it) so they're a good place to "park" funds while your looking into other investment options.
Making Money with Cash-type Investments
The growth potential of cash-type investments is pretty modest because it's based only on very short-term interest rates. On the plus side, what you sacrifice in growth potential, you make up for in security.
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