Cash alternatives (“cash”) fill several needs for investors, although they should not be viewed as a primary, long-term investment. 

Download the report (PDF)

By “cash,” we don’t mean just dollar bills or even the money in your checking account. We use the term as shorthand for a spectrum of assets that are typically very stable in value and can usually be liquidated quickly when you need to cover an expense. Short-term Treasury bills and money market funds are the classic example.

  1. Cash alternatives have important uses, but they are not an appropriate primary, long-term investment for most investors.
  2. For most investors, cash should not represent the majority of their asset allocation dollars.
  3. Retail investors, on average, hold much more cash than their financial advisors recommend.
  4. Similarly, individual retirement accounts (IRAs) hold significantly more in cash than warranted by the long time horizons typical of these accounts.