Cash investments are cash held in a bank account otherwise known as ‘cash at bank’. Cash investments include money in bank accounts, savings accounts and term deposits.
Cash is also known as a ‘defensive’ (low risk) asset and helps reduce the volatility of your portfolio. In fact, cash investments are known as the lowest risk investment outside of putting your ‘money under your mattress’ and provides stable, low-risk income such as interest payments. Interest is often paid in regular intervals (like monthly interest on your bank account).
There are also some investment funds that focus on cash. These investment funds pool together investors’ money and invest in cash related assets such as cash focussed exchange traded funds, which are listed on the stock exchange.
What is a term deposit?
A term deposit is like a cross between a bond (you can read more about them here) and a savings account.
A term deposit allows you to invest your money for an agreed period of time and receive a fixed interest rate from the issuer (usually a bank) of the term deposit. The longer the investment period or term, the higher the interest rate you may receive. Terms range from 3 months to 60 months.
If you decide to withdraw your funds before the end of the term, you will usually lose the interest you were meant to receive if you had kept your fund in the term deposit. You may also be required to pay a fee for ending the term early.
It is also important to remember that if the interest rate you receive is lower than the rate of inflation, then the value of your money will not be growing which can limit your spending power and wealth creation. This is why, investors will typically invest in other assets as well as cash.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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