This is the only time holding onto cash is considered a good investment!

Wednesday: The Independent Investor From the desk of Miles Everson: Happy Wednesday! I hope you’re having a great week so far. Every Wednesday, I talk about various topics related to investing. My goal is to help you attain better gains for your investment portfolio and improve your financial well-being as a result. Today, let’s dive into the importance of cash reserves. Keep reading below to know why holding onto large sums of cash can be a good investment. CEO, MBO Partners Chairman of the Advisory Board, The I Institute

This is the only time holding onto cash is considered a good investment! Normally, folks tune in to Berkshire Hathaway’s earnings calls to see what stocks Warren Buffett is buying. However, they’ll be quite surprised to know that instead of stocks, Buffett is holding on to an ENORMOUS amount of cash. As of the first quarter of 2024, Berkshire Hathaway is holding onto more than USD 182 billion in cash. This means it has plenty of room to buy more companies or invest in stocks. However, as some of you might know, cash doesn’t generate any kind of return, so it’s not considered a smart investment tactic. So for today, we’ll explore why Buffett is holding onto a ton of cash. The Significance of Large Cash Reserves When a company lists cash on its balance sheet, it’s not actually cash, as it falls under a category called short-term investments. In the world of investing, short-term investments are considered as cash due to the fact that they can be easily converted into cash. Specifically, this highly liquid category includes high-yield savings accounts, money market accounts, and even short-term U.S. Treasury bills. Since interest rates have risen, many short-term investments became lucrative for the first time in years. As of today, three-month Treasurys yield about 5.32% as opposed to 0.1% for most of the past 15 years. If Buffett put all of Berkshire Hathaway’s cash into three-month Treasury bills based on that rate, he’d be making billions per year… and that’s a huge amount, even for a company as big as this. Cash that Can Be Put to Work Investors don’t seem to realize how valuable cash is becoming, as several companies out there are sitting with lots of it. Should these businesses be able to earn more than 5% as they put their cash to work, they’re likely better positioned than the market expects. This doesn’t mean that every company with huge cash reserves will be a guaranteed winner as there are lots of factors involved in business and stock performance. However, with interest rates remaining at high levels, any of these businesses could turn its cash holdings into sources of earnings. As long as interest rates remain the same, companies with huge cash reserves stand to benefit… if they utilize their liquidity to make more money. … and should a downturn unexpectedly happen, these businesses will have enough cash to handle that situation. The bottom line? As an investor, you cannot ignore the importance of a company’s cash reserves, especially when the business is using this to make more money. After all, if a business is able to report stronger earnings than expected, it’ll be in a position to boost its stock price in the long run. … and when you’re holding onto a stock with that kind of upside, it’ll lead to better performance and higher gains for your portfolio. EXCITING NEWS AHEAD The world of work has shifted, and there’s no going back. The barriers to entry have never been lower for talented professionals to work independently, and today’s massive external workforce is hardly a pandemic-produced fad. Business owners can only survive in the new work landscape by partnering with this deep talent pool. With decades of experience in both small-business entrepreneurship and executive management at PwC, I truly believe that the future of work is independent. With that, I’m happy to share with you that my book, co-authored with Walter Scott Lamb, is now available for pre-order on Amazon! Free Birds Revolution: The Future of Work & The Independent Mind This is an essential read for both independent professionals and corporate executives. Here, we provide educational and practical guides to unpack the ever-growing workforce and offer you crucial ways to become a client of choice. Click on the link above to pre-order your copy. Let this book help you future-proof your career and organization in the new world of work. Hope you’ve found this week’s insights interesting and helpful. Stay tuned for next Wednesday’s The Independent Investor! Have you watched the latest “Barbie” movie directed by Greta Gerwig? Learn more about the U.S. and China’s differences in terms of social and geopolitical relations in next week’s article!