Simple explanation
Cash: what really remains
Cash feels safe because the number moves little. That can help, but it can also hide a loss of purchasing power.
In a portfolio, cash is mainly about patience, flexibility and avoiding forced selling. The key question is not only what number appears on the account, but what that cash can still buy.
Cash / short-term sovereign instruments
Cash is not read from the displayed balance.
A cash sleeve can be very useful: it gives time and avoids panic selling while allowing rebalancing. Here the charts follow short-term interest-bearing proxies, not banknotes under the mattress: their true quality is measured after inflation.
Short-term interest-bearing proxies: SHY in the United States, the 3-month rate in Japan, and repo in Turkey. The real line removes inflation.
A good currency, calm inflation or credible short-term rates can change everything. That is why several countries are compared.
Choose a country, look at the real curve, then come back to nominal values only to understand the possible illusion.
For a more concrete intuition, read l'indice Big Mac : one product, several currencies and an immediate reading of purchasing power.
Chart A
Nominal view
The value of the short-term proxy before removing inflation.
Chart B
Vue realle
The same short-term proxy, translated into purchasing power.
Condensed comparison
Same starting point, three stories.
Base 100 at the start: the chart shows what really remains after inflation on short-term interest-bearing proxies.