The southward-swing of the stock market is good news for cash investors.Traditionally, financial experts suggest keeping 5% to 10% of your total assets in cash. Given this year's stock market plunge, many financial experts recommend increasing your cash assets dramatically.
So how much cash should you invest? This is a personal decision, based on factors such as retirement age, your current life stage and the risk of the investment. Here are some ways you can manage your cash:
Deposit Accounts: This is a simple cash management tool and should be used for basic needs only. Deposit accounts have the lowest yield of any investment. Find a bank with free checks that offers convenience and safety. Keep an eye out for hidden fees and pay attention to the Federal Deposit Insurance Company (this is what will save you if the banks fail).
CDs and Brokered Deposits: These accounts should be used if you don't need your money on hand, but you would like to put your money in a safe place. Banks set their own interest rates for Certificates of Deposits, and there are currently 6 institutions offering one year interest rates of 4.25% or better.
Money Market Funds: Money funds have no government guarantees. However, money fund managers never let their funds go down the drain, because their reputations are placed on the line. Money markets have low yields and are generally safe and liquid.
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