In the asset class “Cash”, investments are in money market funds.
Money-market funds normally invest in a portfolio of money market instruments or money at call. As a passive investment, the performance mirrors the money market index.
This index can represent the overnight, one or three-month interbank interest rate.
An investment in the money market compared with bonds or stocks is a less risky investment opportunity but also yields lower returns. It can be used as the liquidity reserve for particularly risk-averse investors or to “park” money in the short term.
Because money market funds generally earn lower interest, they are less suitable for investors seeking long-term capital growth.
From 1999 the Asset Allocation Analyzer uses a real money market funds (ETF), including a back-testing calculation.
For the period 1994 to 1999 the Analyser uses a German money market index with interest reinvested (Total Return).