"Cash is safe and predictable." When we talk about cash, we're referring to money that's readily accessible. So, it could be the folding stuff in your wallet or liquid assets held at a bank, mutual fund company or brokerage firm. Cash might look different than you think. Read more. Besides being easy to get at, what all these "investments" have in common is safety and stability.

Risk - The risk of losing principal held in cash is low. Bank saving accounts and certificates of deposit are insured by the FDIC (up to $100,000). Treasury bills are insured by the U.S. government.

Return - Since risk is low, investors must accept a relatively low return on cash. The value of your cash tracks with interest rates. If interest rates go up, returns on cash tend to follow.

Holding some of your money in cash is always a good idea. Of course, it'll be there for emergencies. Its potential for steady, predictable performance can also help balance out the ups and downs of bond and stock activity.

"Cash is good, but..." You can have too much of a good thing. Make sure that you have a cash account with six months' income saved for emergencies. Then it's time to start spreading it around. In the biz, we call this diversification.