Trainee investor had a very interesting post recently at his blog aprivateportfolio. He asked a simple question: does one really need emergency funds and should they be stored in cash accounts at banks?
He felt that with his employment stability (and his wife's) that emergency funds should not be invested in cash accounts, but riskier and better performing asset classes.
What are your thoughts?
Where would you put your emergency cash?
I often wonder if I would be better off having a line of credit in place and more aggressively deploying my cash. At the moment it's sitting in countrywide's online savings account earning 5.25%. I know that if the market plumetted, I'd reposition it into equities right away. Perhaps I should consider it part of the fixed income allocation - one that's artificially high right now - but timing the market seldom works.
What do you think? Are you hording cash? Do you really need all of the emergency cash you've squirelled away? Is it invested optimally?
Regards,
makingourway
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Most of the people talking about emergency funds have all their net worth tied up in their home and retirement accounts. It makes a lot of sense for these people to start to build up non-retirement assets. I don't have an emergency fund per se. Unexpected expenses and more important than loss of income for me. The latter is highly unlikely as a tenured professor. So my first line of defence are credit cards. The more non-retirement assets you have the more likely you can find some asset to sell if you need the money. My next line of defence is probably effectively my trading account. I can also borrow a lot more money without selling investments if neccessary using margin loans...
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