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Making a Case for Cash in Your Investment Portfolio


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Strong arguments can be made that every investment portfolio should contain cash because it is considered a safe and liquid asset. Some examples of cash assets are: money market funds, FDIC-insured certificates of deposit, and bank checking and savings accounts. These cash instruments are protected from the market volatility that may affect stocks or bonds, for example. This stability is one main benefit cash instruments add to your portfolio.

Another benefit that cash assets provide is flexibility. They can be turned into liquid cash almost immediately when needed. The funds may be used as a 'cash cushion' for emergency situations or a resource to fund new investment opportunities. Risk tolerance and time horizon are two important factors to consider when planning how much cash you should invest in cash instruments.