It has been a good few years for cash. As shown in Graph 1, over the past three years cash (i.e. highly liquid assets, like money market funds and fixed-interest assets, such as Treasury bills) has delivered decent returns, when compared to equities and bonds, with significantly less volatility amid ongoing global uncertainty. This has been particularly pronounced this year, with cash delivering 6% versus -9.38% for the FTSE/JSE All Share Index (ALSI) as at end October 2018.
However, when you look at the same graph over a longer period, a different picture emerges. Graph 2, which goes back to 2000, shows that over the long term, cash materially under-performs equities and bonds.
-Gray Issue Catherine Robberts (Allan Gray)