The most popular investment advice in 2023 cash is king
except that not every form of cash is the same
or safe. Cash can be paper bills stuffed under
your mattress, money sitting in bank accounts, money
parked in C DS as well as short term cash
like securities fund management giant Pimco, That you'll need
to keep a couple of things in mind because while
many banks have raised their deposit rates, those increases
have lagged behind the pace of central bank rate hikes
and bank deposits that exceed$250,000 are not typically insured
. Although it is fair to ask if the government
set a precedent by guaranteeing all deposits at Silicon Valley
banks. Then there are C DS and commercial paper
, which is short term debt sold by companies.
They're not entirely risk free either because you're counting on
the bank that's taking your deposit or the company that
borrowed from you to honor its obligations or still be
in business weeks or months later when it's time for
you to collect, essentially, you need to consider
a counter party risk. Even government debt is not
always the safest bet. Think of the trouble that
S V B ran into it loaded up on long
term treasuries at the height of the bond market,
those bonds then fell in value as the fed raised
interest rates. When SVB needed to access cash in
a hurry, it had to sell those bonds at
a loss. So even within cash, there are
degrees of liquidity.