3 ms·

> An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash asse

> An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, as I've never encountered one. Insurance companies invest their premiums. Why shouldn't I?

toomuchtodo 11y ago
Insurance companies and banks are required to maintain a minimum amount of safe/liquid (read: cash) reserves. > I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? Even money market funds have broken the buck before (~2008).
- morgante 11y ago
  > Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? My point is emphatically not that your stocks will maintain their full value. But even at their lowest, their value will be more than enough to cover any emergency fund. A 50% drop on $100k will still leave you with $50k.
  - toomuchtodo 11y ago
    Which would ruin your investment outcome for years (if not decades, depending on the value of your portfolio at the event in question). If stocks take a loss that bad, you need the ability to not sell off to get liquid cash. That is what an emergency fund is for.
    - morgante 11y ago
      Ah, but now that your argument is based on decreasing returns we can just do expected value analysis. Fortunately, many people have already done this, including Betterment: https://www.betterment.com/resources/personal-finance/safety-net-funds-why-traditional-advice-is-wrong/ https://www.betterment.com/resources/personal-finance/safety... Weighted by the probability of happening, you are better off investing all your money. Period.

3 ms·

> An emergency fund IS NOT an investment. Why should one have an "emergency fund?" I would genuinely love to hear a good argument for why keeping any cash asse

by morgante 11y ago

toomuchtodo 11y ago
Insurance companies and banks are required to maintain a minimum amount of safe/liquid (read: cash) reserves. > I would genuinely love to hear a good argument for why keeping any cash assets when one has significant liquid investments, Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? Even money market funds have broken the buck before (~2008).
- morgante 11y ago
  > Can you describe an asset (besides US treasuries) that you can be assured of its value in a volatile market? My point is emphatically not that your stocks will maintain their full value. But even at their lowest, their value will be more than enough to cover any emergency fund. A 50% drop on $100k will still leave you with $50k.
  - toomuchtodo 11y ago
    Which would ruin your investment outcome for years (if not decades, depending on the value of your portfolio at the event in question). If stocks take a loss that bad, you need the ability to not sell off to get liquid cash. That is what an emergency fund is for.
    - morgante 11y ago
      Ah, but now that your argument is based on decreasing returns we can just do expected value analysis. Fortunately, many people have already done this, including Betterment: https://www.betterment.com/resources/personal-finance/safety-net-funds-why-traditional-advice-is-wrong/ https://www.betterment.com/resources/personal-finance/safety... Weighted by the probability of happening, you are better off investing all your money. Period.