o
Cash
–
Cash and cash equivalents – such as savings deposits, certificates of deposit, treasury bills, money market deposit
accounts, and money market funds – are the safest investments, but offer the lowest return of the three major asset
categories. The chances of losing money on an investment in this asset category are generally extremely low. The
federal government guarantees many investments in cash equivalents. Investment losses in non-guaranteed cash
equivalents do occur, but infrequently. The principal concern for investors investing in cash equivalents is
inflation risk. This is the risk that inflation will outpace and erode investment returns over
time.
Stocks, bonds, and cash are the most common asset
categories. These are the asset categories you would likely choose from when investing in a retirement savings
program or a college savings plan. But other asset categories – including real estate, precious metals and other
commodities, and private equity – also exist, and some investors may include these asset categories within a
portfolio. Investments in these asset categories typically have category-specific risks. Before you make any
investment, you should understand the risks of the investment and make sure the risks are appropriate for
you.
[v]
|