Cash Investment

AAA

DEFINITION of 'Cash Investment'

1. Short-term obligations, usually fewer than 90 days, that provide a return in the form of interest payments. Cash investments generally offer a low return compared to other investments. They are also associated with very low levels of risk and are often FDIC-insured.

2. An individual or business's direct financial contribution to a venture, as opposed to borrowed money.

INVESTOPEDIA EXPLAINS 'Cash Investment'

1. Money market funds and certificates of deposit are examples of cash investments. Whereas it might be possible to earn an 8% annual return from a stock, a cash investment might return only 1% per year. Market interest rates dictate how much investors can earn from their cash.

2. For example, in real estate, a buyer who takes out a mortgage is expected to make a cash investment in the form of a down payment. The borrower's cash investment lowers the lender's risk, since the borrower will have something of his own to lose if he defaults on the mortgage. If the borrower's cash investment is less than 20%, the lender will require the borrower to purchase private mortgage insurance to protect the lender's interests.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Money Market Account

    An interest-bearing account that typically pays a higher interest ...
  3. FDIC Insured Account

    An account that meets the requirements to be covered or insured ...
  4. Cash Collateral

    Cash collected when liquid assets are sold during Chapter 11 ...
  5. Cash

    Legal tender or coins that can be used in exchange goods, debt, ...
  6. Cash And Cash Equivalents - CCE

    An item on the balance sheet that reports the value of a company's ...
RELATED FAQS
  1. Other than my savings account, what other types of holdings compound my interest?

    Investors and savers can use the power of compounding interest to accumulate wealth over time. Unlike simple interest that ... Read Full Answer >>
  2. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  3. What types of money are included in money supply?

    There is no universal definition of the money supply; economists and central banks use different measures based on analytic ... Read Full Answer >>
  4. What are some safe fixed-income investments?

    For the majority of younger investors, taking on risk within a portfolio in return for higher returns is the norm. Because ... Read Full Answer >>
  5. What are the characteristics of a marketable security?

    The overriding characteristic of marketable securities is liquidity, or the ability to convert securities into cash and use ... Read Full Answer >>
  6. What is the safest investment?

    Due to the variety of options on the market and the unpredictability of the economic climate, it is difficult to identify ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Why Money Market Funds Break The Buck

    These funds are noted for their safety in a rough market. Read on to find out why.
  2. Options & Futures

    Getting To Know The Money Market

    If you need liquidity and safety on a sum of money, don't forgo potential interest by keeping the funds as cash.
  3. Options & Futures

    Do Money-Market Funds Pay?

    This investment provides security, but its returns may not be adequate for long-term investors.
  4. Forex Education

    Learn To Invest In 10 Steps

    Want to invest but don't know where to start? Learn how to make your money work for you with these tips.
  5. Retirement

    The Money Market

    If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market.
  6. Professionals

    Impact of SEC's New Money Market Fund Rules

    A look at how new rules introduced by the SEC will impact money market funds.
  7. Investing Basics

    What is an Asset Class?

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
  8. Investing Basics

    Five Successful Investing Strategies

    The secret to investing is that there is no secret. Success is all about knowing yourself, getting the basics and using both to make the right choices.
  9. Bonds & Fixed Income

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
  10. Bonds & Fixed Income

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center