I had a discussion with a young colleague today about investments in general. We went through many popular forms such as stocks, bonds, real estate, et cetera, arriving somehow at cash. This became quite humorous for me, as I think investing in cash is amongst the most foolish investment choices. He didn't agree.
We defined "investing in cash" as the process of committing money, storing it in the form of cash (domestic currency in physical paper form or in a chequing account), for the prospect of future returns.
I think most everyone knows why this is a poor investment, in fact I wouldn't even regard it as a proper investment. In my opinion, it's the act of not investing. Sure, you can save cash in preparation for a real, large investment, but I dearly hope that cash isn't your final target.
Anyway, its demerits are simple and numerous: inflation nibbles (or chomps) away at your purchasing power, which is obviously not increasing; you're at the whim of the volatile currency market; and quite plainly, there's no growth. These were the ones I suggested.
He didn't have time for much rebuttal as the lunch bell beckoned us to our cubicles, and being a curious guy, I would like to hear some merits of being a "cash investor". I just doubt a combination of miniscule growth potential and low security make for a good investment.
Brainstorm! - show me your creative financial genius!