Cash

Investing in 'cash' may take a number of different forms. Pooled investment funds sometimes invest in cash as a short term treasury management tool - i.e. for cash flow or liquidity reasons. Otherwise, it is possible to invest in cash as a 'stand alone' asset class.

This is most commonly done through the use of bank or building society accounts where an interest rate would be applied depending on the amount invested and the accessibility requirements for the money (instant access etc.).

Typically these type of accounts are considered to be a less risky investment as the value of the amount invested should increase according to the interest rate applied.

However, the security of the cash in the bank/building society account is only as safe as the institution (i.e. the particular bank or building society) in which it is invested. Also, the 'real' value of the cash amount invested will be eroded over time if the rate of inflation is higher than the interest rate being applied. It is also possible to invest in cash / money market funds.

Typically these utilise a range of different financial instruments (not just cash deposits) and as a result operate differently from bank/building society accounts. You should be aware that the value of cash / money market funds may fall as well as rise.