Risk

The investment of your cash surplus should never be speculative that is, high risk. As in most businesses, your cash surplus may only be a temporary surplus of cash inflows over your cash outflows. Any permanent losses resulting from a high risk investment could be devastating, even to the point of making you unable to continue your business.

The level of risk you are willing to accept ultimately determines the yield of your investment. A higher level of risk will generally provide you with a higher yield. On the other hand, a low level of risk will result in a lower yield on your investment. In some cases, you choose to invest in an investment with a higher level of risk to gain a higher yield. But as a rule, a conservative approach to the level of risk is recommended when investing your cash surplus.