The importance of cash

The importance of cash


While the importance of maintaining diversity in a wealth portfolio is nothing new, emphasis on cash has grown significantly since the global financial crisis. 

While the importance of maintaining diversity in a wealth portfolio is nothing new, emphasis on cash has grown significantly since the global financial crisis. 

If you think sport and investment have nothing in common, then think again.

As someone who watches and plays sport regularly, it strikes me that nothing better embodies the importance of diversity in a wealth building portfolio than seeing a successful sporting team in action.

If you’re not sure where I’m going with this, let me explain…

I’ve played hockey for 30 years, as a striker. Now people often focus too much attention on the role of the striker, probably because winning a game ultimately comes down to how many goals you’ve scored. But in doing so, they neglect to look at the contributions of the other team members in achieving that overall success.

Sure, the striker is important, but invest all your efforts in them and you’ll leave holes in your defence. At the same time, spend too much time defending and you’ll miss out opportunities to get ahead. You need a balance of a creative midfielder, a strong, reliable defender and an aggressive forward to have the best chance of coming out on top.

It’s the same when building a successful investment portfolio. We’ve seen from the GFC the damage that can be done if you focus too much on aggressive wealth building and put all your money into shares. But rely solely on defensive cash investments and you could fall short in the long run. What consumers need to sustain a solid performance all the way through is a diverse mix of “players” to make up their investment “team.”

Whilst the importance of maintaining diversity in a wealth portfolio itself is nothing new, it’s the emphasis on cash that has grown significantly since the GFC and shows no signs of slowing. There has been a definite trend amongst consumers towards investing in cash as an asset over the past few years, and for good reason. People see it as a safety net; it’s delivered a good return over the past few years, it is a low risk asset and of course it’s underpinned by the government guarantee up to $250,000.

Another consequence of the GFC is that people are making a conscious decision to deleverage their debt so they have more money to save. Many people saw their friends lose out financially during the economic downturn so there is a lot more awareness now and consideration for the future.

When it comes to cash investments, we’re still seeing Term Deposits as the preferred option. They have a higher rate of return compared to at-call savings, and are becoming a lot more attractive these days due to banks becoming far more flexible when it comes to withdrawing that cash in an emergency.

Whilst people have been showing a bit more interest in shifting some of their cash assets to the equities market, I think cash is here to stay as an essential component of a portfolio. As long as there is a level of volatility in the market people will remember the GFC and its impact and will take a more cautious approach to safeguard their investments. But if over time they forget the GFC, then who knows?

As we’re all aware, financial markets work in cycles. The best message you can get across to your customers is, surround yourself with a diverse range of assets and you’re setting yourself up for a winning performance over the longer term.

About Mark Woolnough

Mark Woolnough is head of third party distribution at ING Direct, overseeing relationships with intermediaries including financial advisers.


He joined the bank in 200 as relationship manager and has since held roles including head of direct mortgages, NSW state manager (broker) and head of broker distribution.

Prior to joining ING Direct, he had a number of roles at ANZ after participating in the bank's graduate program. 

Mark is heavily involved with ING Direct's community initiatives including the Cerebral Palsy Alliance, School for Social Entrepreneurs and National Centre of Indigenous Excellence. 

The importance of cash
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