Originally Posted by
SBQ
The problem with such a high cash investment (and assuming we are talking about fixed income assets such as bank term deposits, gov't bonds, corporate bonds aka junk bonds, income streams from other fixed term deposits such as in real estate, etc.) is you will not get diversification. While a higher proportion of investment into fixed income assets is considered less risky, it does not mean you will not lose. For eg. a high degree of this asset class (using cash) is invested in assets called 'debentures' and the terminology I see in NZ by various brokers selling these products do come up with some interesting terminology. Such as '1st ranking or 2nd ranking secured debenture' which is an oxymoron in that phrase. I recall some years ago when Hanover Finance had collapsed and yes, the vast majority of the investors lost out or some were able to retrieve maybe 50% of their initial investment. So while you may believe that such "cash funds" are diversified, they are far from that in reality.