Cash and Cash Equivalents

Revised by Ricardo Ribeiro

Well, cash is cash. There is not much else to say.

Cash equivalents are short-term securities that have high credit quality and high liquidity. In other words, they can be considered cash.

You can use cash or cash equivalents to increase your portfolio's liquidity or reduce its risk. Accordingly, you will also reduce its potential return.

This is probably the asset class beginner investors don't even consider. But that is a mistake. Cash can be very useful to control the overall portfolio risk.