Why Cash Is King Right Now

Having cash to meet short term needs is your best bet particularly in periods of high uncertainty as the Covid-19 era.

Covid-19 has stirred a wave of financial and socioeconomic uncertainties across the globe. There is no sector or industry in the nation of the world that has not been impacted adversely by the pandemic.

Some previously thriving sectors have been crippled, some that have hitherto was weak have been comatosed. However, there are some sectors that have been thriving in the crisis like roses growing in the rock.

As markets crash and portfolios are laid waste the implication on consumer behaviour, spending power and investment appetite. Liquidity and the availability of cash has always been a defining factor for business and consumer households. Investors are looking for companies with strong balance sheets, less debt, stable cash flows and holding a respectable yield in dividends.

In coping with the current reality triggered by the pandemic, having cash on hand is very important for organisations and individuals. While it is important to have good investment portfolios, it is essential to have a good portion of fund in liquid investments that are not subject to huge losses due to market pressures.

Cash is essential for the survival of any business, it is also extremely important to the individual consumer and household especially at such a time as these for many reasons:

Liquidity

Cash flow is critical for the survival of businesses, without which they can go bankrupt. Without cash on hand, businesses may not be able to make these necessary investments critical for their growth. Investments may yield great returns but funds tied up cannot be accessed on the short-term especially when emergencies emerge.

Security

Having a cash reserve, removes the need to depend on the payoff of market investments to meet expenses.

To Maximise Opportunities

Without the necessary cash, organisations and individuals will not be able to take advantage of once-in-a-lifetime opportunities to buy a valuable assets at unbeatable prices.

Without cash, you would either be forced to sell shares of other investments, perhaps at a time when the market is down, or forgo the investment opportunity altogether.

Response to Emergency

Both businesses and individuals face emergencies where they need to pay immediate & unexpected expenses which may not have been budgeted. Having physical cash on hand or money in a checking account creates the ability to pay for unexpected expenses without reaching for a credit card and incurring high interest debts.     

In truth, availability of cash represents one of the safest investments possible while preparing for uncertain times. Essentially, it not only avoids the possibility of negative financial positions, but also positions individuals and businesses to take advantage of various expansion and growth opportunities that could present itself in the midst of crisis.

Written by Lawretta Egba.