Cash is An Interesting Investor Portfolio Diversification Tool Next to Bitcoin
With the stock markets being subject to high volatility these days, investors around the world are looking at different options to diversify their portfolio. While some of them have taken a keen interest in Bitcoin, most of the investors are looking at cash as their preferred solution. This may seem odd to some people, but it makes a ton of sense at the same time as well.
What Makes Cash So Appealing To Investors?
Based on statistics provided by Bank of America Merrill Lynch, roughly US$208 billion of inflows can be attributed to cash and money market funds. In this day and age of financial insecurity in the stock markets, cash seems to be the only remaining traditional financial vehicle worth gambling on. But at the same time, various banks around the world are pushing for the abolishment of cash altogether.
Most people would assume investors are flocking to bonds and stocks, as they have been one of the most popular investment vehicles for quite some time now. Nothing could be further from the truth, however, as close to US$50 billion has been pulled out of bonds as well. Only stocks have seen a poor growth in attention, although the numbers are nothing to sneeze at.
Volatility is putting the fear into hearts of investors these days. Local markets are somewhat safer compared to overseas investments, but it is impossible to predict how either will evolve in the coming months. This is part of the reason bonds are far less attractive, as they require investors to “lock” their funds for an extended period.
Furthermore, interest rates remain far too low to make any traditional investment even remotely appealing right now. While cash may not offer any interest rate at all, it is more accessible and usable all over the world. Plus, with cash, it is rather easy to move funds around the world, which is of high importance to investors.
However, cash is losing a small portion of its value at every time, simply because there is a lot of inflation. Central banks keep printing money to provide a financial stimulation when the economy is struggling. At the same time, this decreases the value of all other cash bills and coins in circulation by a small margin.
While cash may not hold all of the answers investors are looking for, it’s one medium of value that will be affected less if a new financial crisis were to hit right now. While the money will lose some value due to increased inflation, at last, there will be no funds missing from savings and retirement accounts, like what happened in 2008.
So What About Bitcoin Then?
Bitcoin holds more answers than cash right now, although the modern digital currency is still struggling with adoption by both merchants and retailers around the world. Even though Bitcoin has the potential to become the new global currency in a few years, banks and governments are thoroughly opposing the idea of letting digital currency take off without regulation.
At the same time, cash is being opposed by these same institutions, and investors seem to flock to that medium of value exchange. Bitcoin could become the next major asset in every investor’s portfolio in the future although there is no guarantee this will ever take place. But the digital currency sure looks appealing right now, as it operates outside of the realm of traditional finance altogether.
What are your thoughts on investors gambling on cash as an investment vehicle? Let us know in the comments below!
Source: CNN Money
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