Good Reasons to Hold Cash

GeorgeHowell

A._Badger wrote: »

Well, let's just wait and see, shall; we? My money's on the 'little Englanders' having the last laugh.

Does 'little Englanders' imply that we might be seeing a break-up of the UK sometime soon, rendering chances of Labour governments at Westminster severely, if not fatally, damaged ? I do hope so.

A._Badger

GeorgeHowell wrote: »

Does 'little Englanders' imply that we might be seeing a break-up of the UK sometime soon, rendering chances of Labour governments at Westminster severely, if not fatally, damaged ? I do hope so.

Yes, that would be nice, wouldn't it? I very much doubt if it's the opinion of the genius who described sensible eurosceptics as 'little Englanders; though!

albertdesuja

Hi,

The reason behind holding the cash is the liquidity view of cash, due to which it works as the great source of investment in emergency condition. By holding cash it become easy to manage the business and investment .


Thanks.

GeorgeHowell

A._Badger wrote: »

Yes, that would be nice, wouldn't it? I very much doubt if it's the opinion of the genius who described sensible eurosceptics as 'little Englanders; though!

That was typical New Labour/left-wing propaganda aimed at stifling debate. The same applies to those who described anyone raising the immigration issue as racist. Both have been well and truly debunked now, and these tired and discredited descriptions just expose the paucity of intellect on the part of those who level them.

robmatic

GeorgeHowell wrote: »

The saving rates are what they are, regardless of borrowing rates, and the tax is what it is. Investors can only make decisions on net returns, regardless of how they come to be. But I repeat, that since 1999, and considering the capital risks involved (equities : theoretically unlimited; cash : zero), cash has been a better bet.

What about periods other then 1999-2012? Cherrypicking a starting point when equities were at a peak tells us little.

And it's not correct to state that there is zero risk in holding cash.

Ark_Welder

robmatic wrote: »

What about periods other then 1999-2012? Cherrypicking a starting point when equities were at a peak tells us little.

And it's not correct to state that there is zero risk in holding cash.

Choosing a 1999 start-date is valid for a number of reasons - but not all of these are necessarily negative. It highlights the need to avoid the hype around an investment asset or sector, and there was a lot of that around equities in the approach to the end of the milennium. But hype can also be negative in its inclination as well as positive, so overly negative hype could be viewed as a positive indicator of future returns.

A frequently-made comment is "It's time, not timing". Personally, I think that it is both: get your timing wrong and the time taken for a recovery might exceed your timescale - and it is this which I believe should be one of the main factors for determining investment decisions.

Also, the focus should be on total returns rather than just capital returns - and this applies for cash too (inflationists and PM'ers tend to conveniently ignore compound interest when presenting their case). Whilst the capital return from the FTSE index might be negative over the period, the total return is still positive. However, the return on cash is related to interest rates, whereas the return from equities is related to GDP, and to some extent, inflation (due to prices being raised). One would hope that a healthy economy results in a healthily growing GDP, whereas higher interest rates would tend to indicate higher inflation expectations, which ought to mean a lowering of the real return that will be available from cash.


In all, though, hindsight is a wonderful thing - except when it comes to predicting the future.