Cash – Investment Strategy

A cash investment is a short-term obligation, that provides a return in the form of interest payments.

What is a cash investment?

A cash investment is a short-term obligation, that provides a return in the form of interest payments. Cash investments generally offer a low return compared to other investments. They also have very low levels of risk.

A cash investment also refers to an individual’s or business’s direct financial contribution to a venture, as opposed to borrowed money.

 A cash investment is often used to protect wealth and diversify a portfolio.

Key Features

Benefits of cash investment

Cash investments are easy to understand and very quick to action. You can set up some savings accounts and term deposits almost instantly. You can choose between a fixed rate of interest or a floating rate. Cash investments are considered the most secure type of investment.

Basically cash investments allow you to secure part of your investment portfolio. The amount this should make up in your portfolio depends on your risk tolerance. It’s also worthwhile noting that a cash investment may be helpful when in between investments.

Downside of cash investment

As mentioned above, because cash investments are secure, the return can be small in comparison to investment in shares and property. Cash investments are classified as defensive investments, which are investments that provide a steady income and stable returns with little or no capital growth or little or no volatility. In comparison, shares and property are known as growth investments as they can provide an income and increase in capital value, although they tend to be more volatile than defensive investments.

In reality, what this means is having too little of your portfolio in cash could be a risk to achieving your financial goals in the event another investment you had made went poorly. But likewise, having too much of your portfolio in cash could mean you struggle to generate the returns you need.

How do I invest in cash? 

It’s likely you already do! If you have a bank account, specifically a savings account, you’ll have the opportunity to earn interest back by meeting obligations such as deposit limits.

If you need help choosing the right investments, get financial advice. A moneylab financial planner will help you set your financial goals, understand your risk tolerance and find the right investments for you. They are the experts in finding the best type of investment to suit you and your needs. If you have an investment idea or are looking to boost your wealth, contact us, and we’ll develop the most effective investment plan catered to you.

Caution!

Investing without knowledge and understanding is just speculation and relies on luck. We recommend speaking to a professional about your financial goals and needs to ensure you make educated and composed decisions. Contact us today to speak to a financial advisor, who will help bolster your investment strategy and returns. 

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Term Deposits

Term deposits are a low-risk way to invest your money and earn a fixed rate of interest.