As of March, Apple (Nasdaq: AAPL) was sitting on a whopping $66 billion of cash and investments. It generated $23 billion in cash flow over just the previous 12 months. With no dividend or share buyback program in place, the cash is piling up rapidly. It's no wonder The Wall Street Journal took Apple to task over the low returns it is getting on its cash stash.

The Journal said Apple could learn a thing or two from Microsoft (Nasdaq: MSFT) about generating returns from cash. The big software maker doesn't just invest in cash. Microsoft also invests in bonds, stocks, and derivatives exposed to grain, precious metals, and energy. That sounds more like a hedge fund than a tech company. Microsoft's aggressive management of its cash hoard could be attributed to its longtime treasury leader, George Zinn, who has a background that includes working at a money management firm that specialized in foreign exchange and commodity trading.

The Journal article went on to note that Google (Nasdaq: GOOG) was following in Microsoft's footsteps...albeit "not quite as adventurously." Google hired a former Microsoft treasury executive who "diversified its portfolio."

In 2010, more risk meant more reward. Adventuresome Microsoft did get a noticeably higher return on its cash investments last year than less adventuresome Google (see table). And Google's investments outperformed Apple's.  

Company

2010 Return Rate

Apple 1.0%
Google 2.8%
Microsoft 3.7%

Source: Wall Street Journal.

But sometimes more risk means ... well, more risk. In 2009, stodgy Apple outperformed Google, which outperformed adventuresome Microsoft (see table).

Company

2009 Return Rate

Apple 1.8%
Google 1.6%
Microsoft 0.4%

Source: Wall Street Journal.

The compounded return rate over the two-year period narrows the gap in returns among the three companies, as shown in the following table. Indeed, Google's moderately adventuresome approach outperformed Microsoft's more adventuresome approach.

Company

2009-2010 Compounded Return Rate

Apple 2.8%
Google 4.4%
Microsoft 4.1%

How bad can an adventuresome treasurer be? Too much cowboy spirit in the treasurer's office at Dell (Nasdaq: DELL) became a material drag on earnings in the early 1990s. And it hasn't been that long since derivatives contributed to a global financial meltdown, and money market funds that stretched for a little extra yield "broke the buck," froze redemptions, and liquidated.

Foolish takeaway
I'm all for Apple putting its megahoard of cash and investments to better use. But reaching for yield in an environment that doesn't offer it -- particularly as risk aversion seems to be rising -- isn't a better use.

What will Apple do with its cash? An easy way to stay on top of market developments is the Motley Fool's free new My Watchlist feature. You can get up-to-date news and analysis by adding these stocks to your Watchlist now:

Fool contributor Cindy Johnson owns shares of Microsoft. The Motley Fool owns shares of Google, Apple, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Google, as well as creating a bull call spread position in Apple and a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.