What is the key feature of a cash account?

A cash account is designed to require the full payment in cash for any securities purchased. This means that when an investor buys securities in a cash account, they must pay the entire purchase price upfront. Unlike margin accounts, which allow investors to borrow funds to make purchases, cash accounts do not permit borrowing, thus ensuring that the investor has the necessary funds at the time of the trade.

This payment requirement promotes responsible investing because it limits the risk of incurring debt for securities purchases, as everything must be paid in full. Investors in cash accounts are also typically protected from the volatility and risk associated with margin trading, where the potential for higher returns also comes with a greater chance of losses.

The other options relate to features that are not applicable to cash accounts; for instance, margin trading and short selling involve borrowing funds and are therefore not features of cash accounts. Tax-deferred growth is a characteristic associated with certain types of retirement accounts, not standard cash accounts.