Cash Equivalents are fixed income investments that are short-term, liquid and marketable securities. Cash Equivalent investments are for idle cash that can be invested to earn some return. The instruments have maturities of one year or less, little credit risk and are highly marketable. Cash equivalents securities that earn interest and can be converted to cash quickly, at full market value include:
- Certificates of Deposit;
- Treasury Bills;
- Short-term Municipal Obligations;
- Commercial Paper; and
- Money Market Funds.
Cash Management programs are essentially a part of an overall investment strategy to invest all available assets as efficiently as possible by maintaining adequate cash and cash equivalent balances to meet liquidity needs and investment opportunities.
A financial advisor can help you determine the appropriate proportions for your assets that should be held in cash equivalents to meet for your near term liquidity needs and investment opportunities. The asset allocation decision can be made with reference to your financial plan and investment policy statement.
