If you are holding large amounts of cash in the bank, you’re losing money. If you’re too busy to mess with it, put the burden on your banker. Call and tell him or her to help you maximize the yield on your cash balances.
For cash that you might need soon, the solution is likely a sweep account.
Set it up so that the balances are automatically swept each night into a money market account and invested.
If you are holding cash you won’t need for a while, invest it in a manner appropriate for the time horizon. For example, if you’re confident that you won’t need a certain amount of cash for a year, invest in a one-year certificate of deposit that will provide a higher yield than shorter-term investments. If five years, maybe corporate bonds that yield more than cash, money market and one-year certificates of deposit. If it’s more than ten years, consider equities, which have higher volatility but should also offer superior long-term returns.
But as you chase the hard-earned money each day, don’t ignore the easy money.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2012.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
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