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Wednesday, November 7, 2018

Cash Investments The Basics

Safe investments are hard to come by these days. You never know when the stock market is going to crash or a financial institution is going bankrupt. But wait before you give up hope. Consider what cash investments can do for you. It is nothing new, just a forgotten concept in the sea of new age financial instruments.

What is a Cash Investment

So what exactly is a cash investment? Any investment that has high liquidity and definite interest rates attached is known as cash investments. The rate of interest may be low but you can be sure to get your principal amount back at the end of the stipulated period. Risk is minimum and nobody is gambling with your money. What you put in is the minimum that you will get back. For example, savings accounts are cash investments. Maybe you won't get as much returns as property or a trading account would, but your money is safe. A good mix of investments can offer a certain measure of financial safety and security even if one sector goes down.

When are Cash Investments a Good Idea

Cash investments are ideal for increasing your savings. There are short term and long term cash investments that are available for you to choose from. Short term investments yield less interest than long term ones. But since most cash investments won't cost you anything even if you want to liquidate it, long term cash investments pose no danger. A volatile financial market is another reason for choosing cash investments. There is no reason to take an unnecessary risk. So if you are still unsure of the returns from the market, hold on to your money for some more time. Cash investments are also a good idea if you have not yet decided where or what you want to invest in. Keep your cash safe till you make a decision.

Advantages

The biggest advantage is the low risk associated with these investments. It is the best method available if you want to save money for your children's education, unforeseen medical needs or your retirement. Even thought the returns are low it is a guaranteed return as opposed to investing in something based on a speculation or hunch. The liquidity is high with little or no charge for withdrawing money when a need arises. A combination of cash investments can actually help you generate income at a steady rate. Also diversifying your investment portfolio will help to maintain a balance between high risk and low risk investments.

Disadvantages

The most obvious disadvantage and possibly the only disadvantage are the low returns or interest rates that you will get from cash investments. But patience is the key in this case. It does not matter if your friends are minting money in the stock market. Take only the risks that you are comfortable and confident of taking. In the long run you probably will have the same bank balance as your friends because just like they get high returns on some, they make high losses also.

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