The Cost of Holding CashSubmitted by Castlebar Asset Management on June 20th, 2013
Cash, money market funds and very short term bonds are part of most asset allocations. It has an important role as a tactical asset allocation tool also as a place to store dry powder while waiting for your next investment opportunity. Blackrock created a graphic that lays out the impact of holding cash in your portfolio. It is understandable why cash has a lower rate of return than other asset classes although the real rate of return after taxes and inflation is negative. The takeaway from this is you cannot hold large amount of cash for years. It will affect your purchasing power.