- JSE All Share (ALSI) 110,493.10
- Rand/Euro R 19.01
- Rand/Pound R 22.21
- Rand/US Dollar R 16.50
- Rand/Aus Dollar R 11.59
The Cost of Cash
Most investors know that cash is “safe.” Not all investors realise that over longer periods, South African cash has delivered a low real return for investors after inflation and taxes are stripped away. Safety, in this context, is a perception built on low volatility, while the inflation risk is not fully appreciated by investors.
This article argues that cash is not a low-risk asset in the financial planning world. Instead, the risk is simply deferred into the future and crystallised through opportunity cost in time. This means the long-term view of cash as an investment needs to be evaluated in context of its role and the long-term costs of holding it.
