Friday, February 15, 2019

War Chest

Cash is a placeholder rather than a thing. That's why it doesn't get paid very much. It is like a teenager sitting at home waiting to go to university, or get a job. It still eats (inflation) but it is definitely only earning minimum wage if anything. Bonds are like working for someone else. They need a salary, so they take the cash and build something for someone else. Equity is a slice of ownership in a business. The money only gets paid if it creates something people are willing to pay for. So why hold Cash? Since, like the teenager, it may be useful if you need an extra set of hands. Bonds and Equity are like the friend/family that is always busy because work comes first. A War Chest is when you hold more cash that you would otherwise because of a potentially exciting opportunity. Google, Apple, Amazon etc. hold big War Chests of cash so that they can buy the next Google, Apple, or Amazon if it pops its head up.

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