Cash and cash equivalents offer liquidity and stability from "summary" of All About Asset Allocation, Second Edition by Richard Ferri
Cash and cash equivalents play a crucial role in an investment portfolio due to their ability to provide liquidity and stability. Liquidity refers to the ease with which an asset can be converted into cash without significantly affecting its market price. Cash and cash equivalents, such as money market funds and short-term Treasury bills, are highly liquid assets that can be quickly converted into cash when needed. This liquidity can be especially important during times of economic uncertainty or market volatility when investors may need to access their funds quickly. Furthermore, cash and cash equivalents offer stability to a portfolio by providing a safe haven during periods of market downt...
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