According to the Wall Street Journal, cash was the best
performing asset class in 2018. However, many investors shy away
from cash investments, such as Treasury bills, money market funds
and savings accounts. Given their modest returns in recent years,
that is not surprising. But, cash does play an integral role in a
well-diversified portfolio, particularly as interest rates
increase.
Relative stability
For starters, the low volatility and liquidity of cash
investments provides stability in the event of a significant or
prolonged market downturn. This is especially important if the
length of time before you need to utilize your portfolio is
relatively short. Needs and life goals can dictate such timing.
Driving factors such as nearing retirement, college tuition for a
child and a new car are just a few examples. Each individual
circumstance is unique and it is important to create an approach
that works for you.
