Cash Investment Vehicles

Robert Kiyosaki mentioned that to be financially free, you need to build up your passive income such that it exceeds your monthly expenses or liabilities.  To build up your passive income, Robert Kiyosaki advised that we should move towards the “I” – Investor quadrant of the Cashflow Quadrant and let the money work hard for us, instead of us working for money.  As investor, we invest our money into investments that can generate passive income for us.

There are many forms of investment, but one of these that most people are familiar with  is cash investment.

Cash investments are liquid or short-term, and relatively safe investments. Many cash investments offer a guarantee of principal, but give lower returns. Traditionally, savings accounts have been considered cash investments, but cash investments also include investments with up to six months in maturity.

The following table is a summary of the various cash investment vehicles:

Bank & Savings Accounts      

Offered through most banks and credit unions. In return for a guarantee of principal, or FDIC insurance, you typically earn less in return.

Money-Market Mutual Funds      

Invest solely in short-term debt instruments. They can be converted quickly to cash, and most funds offer shareholders personalized check-writing services. Don’t get this confused with a bank money market. Money-market mutual funds are not FDIC insured; however, they are very safe.

Certificates of Deposit (CDs)      

Short-term obligations of commercial banks, savings and loans, or other thrift insitutions. Certificates usually range from three months up to five years. Remember, however, that only CDs with six months in maturity or less should be considered liquid investments.

Treasury Bills      

Short-term debt instruments issued by the United States Treasury. They carry maturities one year or less from their issue date. T-bills are purchased at a discount. For example, if you purchased a $1,000 26-week T-bill, you would pay $975 for it, and in 26 weeks, when the T-bill matures, you would get $1,000.

Savings Bonds      

Issued by the U.S. government. The face values range from $50 (EE bonds) to $10,000 (H bonds). Some savings bonds are purchased at half the face value and mature at face value. The maturity date depends on the rates of interest during the holding period. The different kinds of bonds are E and EE bonds, H bonds and I bonds.

Fixed Annuities      

Issued by life insurance companies and money in them accumulates tax-deferred. During the payout phase, annuities can guarantee a set payment as a lump sum or in periodic installments for life or for a specified term.

Cash Value of Life Insurance      

Generates equity from the interest of other gains. This equity or cash value may be accessed through policy loans.

Cash investments are not always used for short-term goals. For instance, fixed annuities and the cash value of life insurance are frequently used to keep funds guaranteed during retirement.

Cash investments are relatively safe but their return is also low.  This means if you want to build up your wealth solely using cash investment vehicles, it would take you a longer time. 

3 Replies to “Cash Investment Vehicles

  1. I am thinking of bond investment at Malaysia but have no idea how to start. In addition, I kept apart hidden jewellery (ring or necklace gold) that haven’t generate any return for me for the past 15 years. Any idea how to monetize my jewellery?

  2. I am no finanical advisor, but here’s just some friendly ideas.

    For bond investment in Malaysia, you can start by asking people around you, like friends and relatives, for general information and personal experiences.  Once you have some vague ideas, you can approach your financial advisor for more advices on bond investments.  The reason why I did not suggest going first to the financial advisor is that sometimes they are talking too much financial terms and for me who has low financial literacy, sometimes I find it hard to follow and have to ask a lot of questions.  I prefer to do some initial research by talking to those around me, so that when I talk the financial advisor, I can better clarify and ask for more relevant advices.  Bear in mind that initial information from friends might not be 100% accurate.

    As for your jewellery, if there is potential that the value will appreciate with time, you might want to keep them and play for capital gain.  If not, the general idea will be to convert them into other forms of assets or investments that can give you high return or passive income.  Some possibilities could be real estate, cash investments, paper assets such as high dividend stocks and mutual funds, depending on what is your risk profile and your objective.

    This is my idea.  As always, please consult your financial consultant for more professional advice.

Comments are closed.