Benefits of investing in cash for senior citizens
Basically, there are 3 types of investment i.e., stocks, bond and cash. Cash investments offer the lowest potential returns of all the investment types. It is also the lowest risk investments and is used for short term goals. Returns from cash investments come in the form of regular interest rates through bank accounts, savings accounts and fixed deposits. These investments are considered a defensive asset that helps in reducing the volatility of your portfolio. Some investors basically senior people think cash investment is for unexpected expenses.
Which is better: Fixed deposit or debt funds
Senior citizens are advised to consider debt mutual funds instead of fixed deposits as they are considered more remunerative and tax efficient. Liquid and short-term debt funds are offering an average of 6.7 – 608 % per annum while fixed deposits with the same tenure offer 6.9 – 7.4 %. A short-term debt fund is best if it offers higher returns with promised interest rates to the senior citizens. However, these are subjected to market risk, unlike fixed deposits.
The main advantage of cash investment is the preservation of the capital. It is also called as the safest way to invest. Money invested in money market funds or certificates of deposits is covered by the Federal Deposit Insurance Corporation. This means that the money is protected against loss. Another advantage of cash investment is that it protects the investors from selling their stocks or bonds during emergency conditions. Having cash investment is the best way to overcome unexpected expenses. The investors have immediate access to their money through a simple withdrawal method.
The major disadvantage of cash investment is low returns. As the investment is the safest hence there should be some drawbacks. Investing in cash for the huge amount of money is worthless as your portfolio returns will suffer. So, you must only invest as much money as you want in your hand for expenses.
Cash investing plays a major role in making a good portfolio of investors. There are four choices for investment options:
- Certificates of Deposit
- Money Market Mutual Funds
- Money Market Accounts
- High Yield Checking Accounts
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Cash investments offer a better security option than the other investment option. Cash investments can be easily withdrawn in case of urgent financial requirements. Cash investment is the most suited investment for senior citizens.