Investing in cash? It is easier than you think

When people refer to “cash” as an investment, they are referring to short-term investments that are unlikely to experience a change in value and can be accessed quickly if you need the money. Commonly, this class of assets is called “cash equivalents” or just cash for short.

Cash equivalents are less risky than bonds or stocks, but you should also expect more modest returns.

A practical example:

Jamie has £10,000 and is hesitant to invest it in a stock or bond right now. She has a very low appetite for risk because she may need to access her money soon to buy a home. Jamie will be placing her money into “commercial paper”, these are short term bonds being offered by very reliable and trustworthy companies. She can withdraw her money every 30 days without any issues, and the commercial paper is unlikely to lower in value. This investment carries very little risk, so Jamie only collects 1.5% a year.