Not necessarily. Cash accounts – sometimes called cash-equivalent investments – are designed to give you easy access to your money. Similar to checking and savings accounts, they can come in the form of certificates of deposit (CDs), Treasury bills (T-Bills) and money market accounts
You should consider having a portion of your portfolio in cash accounts because they can offer steady value with little or no risk. But because there isn’t much risk, you won’t get a high rate of return on the money in a cash account.
Plus, there’s limited growth potential. And over time, this small growth means you may not keep up with inflation – and the buying power of your money could suffer. Depending on the product, there also may be early-withdrawal fees.
Cash accounts are a good thing, but should probably be just a part of your total investment portfolio. How much depends on things like your age, risk tolerance and the time you have left to invest before retirement.
Know that money market funds are not insured or guaranteed by any agency of the federal government. And while they seek to preserve the value of your investment at $1 a share, it’s possible to lose money by investing in them.