Thursday, January 22, 2009

Cash is Trash or Cash is King ?!

Cash is Trash or Cash is King ?! Well, it depends on whether bulls rule the market or bears rule the market.

When the market goes up everyday in high gear, people say "Cash is Trash". Cash does not get inflation adjusted. So, owning a stock is far better than just stacking cash under your pillows.

When market continuously falls down like a knife, people say "Cash is King". Investors normally come to this mind set only after loosing all the cash they had in hand. Initially, when the stocks fall down by a few percentage points, investors use all their available cash to 'average down'. However, once they run out of cash and when the market continues to drop down, they start to realize the importance of "Cash".

So, what do we conclude. Is it good to hold "Cash"? The answer is, "Yes" & "No". The money that you would need in the next 5 years should not be in the stock market. However, in the long run, stocks prove to be appreciating in value and also get inflation adjusted. So, it is wise to invest the 'long term' money in the stock market on 'healthy' stocks.

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