Cash – Asset Class

We consider cash investments to typically include money in bank deposits or fixed term deposits.

The investment returns come from interest paid on the amount invested and there is no risk in capital fluctuations of the amount in a term deposit or savings account. Returns on cash tend to be the lowest of all asset classes over time.

While cash can produce an income and protect against negative returns, its capital value does not increase over time and this leaves the investment susceptible to inflation risk.

Inflation is the measure of the increase in prices of goods and services over time. We typically measure inflation using the Consumer Price Index (CPI). Usually, a dollar will buy less in the future than it will today.