Read today’s Sunday Times and came across a sloppy piece of article by a
senior journalist.
It referred to research by the
Investment Management Association of
Singapore (imas) and said that it discusses “cash, shares, bonds and
unit trust.”
It later referred to the average annual return of
the different categories as:
Shares
9.31%
Cash 5.35%
Bond
7.38%
Commodities 7.11%
When I saw
that, I nearly fell out of my chair. You mean the money I have in my
pocket will grow 5.35% without doing anything? And the journalist nicely
put inflation as averaging 2.9% over the same period. You mean
Singapore dollar can outrun inflation?
I just went online to the
imas site to see the research in question. It stated on page 20 of
their Personal
Investing booklet that “Cash is a safe and liquid asset.
However, you do not earn a return if it sits in a box under your bed.”
I breathed a sigh of relief that at least the booklet is stating what
should be pretty obvious to anyone writing on financial matters.
It
also gives the definition of what cash-equivalent is, “…are instruments
that are almost as liquid and safe as cash which also provide some
return. These instruments are known as cash equivalents,”
So
what are the categories of cash equivalents? They are:
- savings
and interest bearing checking accounts
- fixed or term
deposits accounts
- certificates of deposits (minimum of
$250,000)
I am not sure of this, but I would have thought
that money market funds provided by some brokerages here should qualify
as cash equivalent, but then what do I know.
On page 24 of the
same booklet, it goes on to give the reason why you should invest in
shares, which is what was published in Sunday Times, but with an
important difference. It stated “Cash Equivalent” and not what the
article in the Sunday Times stated as “Cash.”
You may argue that
it is a matter of semantics. But in this case, when you are publishing
to millions of readers, you have the responsibility of making sure what
you are writing about makes sense. Else there maybe gullible readers who
will think, “Hey, I don’t have to invest, since my cash will grow 5.35%
annually.”
Cash is NOT Cash Equivalent.
Source:
1. Introduction
to Personal Investing by imas
2. Making Sense of Financial
Jargon By Lorna Tan Sunday Times 11 April 2010
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This
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