Unit 2 · Level 1 · The instruments
Cash & the rest
Beyond stocks, bonds and funds sits the supporting cast. Money market funds park cash in ultra-short-term debt and earn interest close to central bank rates. Gold pays nothing (no coupon, no dividend) but has held value across centuries of crises. Property can pay rent but is famously illiquid: you can't sell a bathroom to cover a surprise bill. Every asset answers the same two questions differently: what does it earn, and how fast can I get out?
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What you get asked
What does a money market fund actually do with your cash?
Think 'parking garage for cash': very short-term loans to governments and top-rated banks, earning interest near the central bank rate while staying easy to withdraw.
What's the honest catch with gold as an investment?
Gold's value rests purely on what the next person will pay. It has protected wealth through crises for centuries, but a lump of metal never pays you to hold it.
How quickly an asset can be turned into cash at a fair price is called its ___.
Stocks and ETFs sell in seconds; an apartment can take months. Liquidity is why property wealth can't rescue you in a cash emergency.
Match each asset to its typical role in a portfolio
In the EU, bank deposits are typically protected up to €100,000 per person per bank, which is one reason plain savings accounts still earn their place.
Why do most long-term investors still hold SOME cash-like assets despite their low returns?
Each instrument has a job: stocks grow, bonds steady, cash stands ready. Trouble starts when you ask one tool to do another one's job. 🐜
The rest of this unit
Stocks, bonds, funds and cash: what you're really buying.