Stock Market Glossary
Cash ratio
Proportion of liquid assets in the portfolio.
In brief: Proportion of liquid assets in the portfolio.
Meaning in practice
An increased cash ratio reduces the risk and creates liquidity for subsequent purchases in weak phases, but costs ongoing returns. How high it should be depends on the risk profile, market phase and personal life situation.
Context for investors and traders
The term helps put market information into context. Its relevance depends on the instrument, investment horizon and current market situation, so it should be read with other data and a personal risk framework.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
