Investing in Cash

In the early 1990’s, investing money in cash or certificate of deposit (CD) seemed like a bad investment decision. The main reason for this was the fact that no financial institution of bank, offering a CD, gave a return of no more than 5% per annum. Many investors saw this return as a joke and invested their funds in stocks.

By the early 2000’s the joke backfired on many investors who held

onto their stocks too long. The market reversed and many investors lost all their investments in stocks. By this time, CD’s and a normal savings account, offering a 1% return per annum, seemed not to be a bad decision as it was better receiving a 1% return than loosing one’s life earnings.

Investors interested in investing in Cash may also be interested in putting money in a Money Market Fund, which pays a higher return than a normal bank. In short, a money market fund is a mutual fund that invests in short-term securities such as CD’s and commercial paper.

Investors can also invest in US treasury bills, which offer a safety net due to the fact that it has the backing of the US Government.