I'm inclined to suggest that a pocketful of gold coins would suit me just fine as a cash alternative. :)
Generally, we use
cash to represent the most stable and secure proxies for the U.S.
Dollar we can find. (*Edit: As
@msf mentions further down,
cash is also highly liquid.) The best examples would be: short term T-Bills, government money market funds, and government insured bank deposits. However, we all stretch that definition somewhat in pursuit of better return. Who wants to earn a half-percent on an insured bank account?
So it really depends on risk tolerance and what you're trying to achieve. Without checking their most recent literature, I'm fairly confident D&C tries to make DODIX a suitable cash alternative for folks who who have a 3-
5 year time horizon (and it's telling that they don't offer a money market fund). They're telling you that you may find yourself on the short end of the stick after 1 or 2 years with this fund, but if you can hang on to the fund for 3-
5 years you'll very likely recover at least 100% of your initial principal.
My own working definition of
cash is pretty conservative. Not because it's the "right" definition. But simply because that's the way I structure my investments. Cash to me extends only to the reaches of a conservative ultra-short fund like TRBUX. (Not all ultra-shorts are the same.) Since I've owned the fund (about
5 years) I can't remember the NAV deviating by more than 2 cents from it's original $
5 offering price. It's been stuck st $
5.01 for several months now. That's pretty darn good. And I expect it will soon be yielding above 2%, if it isn't already, as rates trend upwards.
