This isn't just the money in your pocket. It's also other "cash-equivalents," primarily highly-secure investments that can be readily converted into cash. These include your savings or chequing accounts, GICs, Treasury Bills and money market instruments (very secure, short-term, interest-paying investments).
Cash investments have the lowest risk, but they also have the least growth potential. So what are the advantages of cash investments?
cash holdings maintain the safety of your principal (the money you invest)
you are highly unlikely to lose money
they offer a lot of liquidity (meaning you can get your money when you need it) so they're a good place to "park" funds while your looking into other investment options.
Making Money with Cash-type Investments
The growth potential of cash-type investments is pretty modest because it's based only on very short-term interest rates. On the plus side, what you sacrifice in growth potential, you make up for in security.
