Smarter approach to "emergency funds"?

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willthrill81
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Re: Smarter approach to "emergency funds"?

Post by willthrill81 » Wed Mar 25, 2020 4:20 pm

mega317 wrote:
Wed Mar 25, 2020 4:11 pm
willthrill81 wrote:
Wed Mar 25, 2020 12:36 pm
Back when we still had an EF of some size (we no longer have a real need for one), we invested 2/3 of it in Wellesley Income fund and left the remainder in hard cash stored securely.
That's right, I remember you posting about physical cash in the past. When you paid off your house did you dig all that up and send it to Vanguard?
No, we've still got it. Also, while it's not designated as an EF since it fluctuates in value, we also have an account where we save for non-monthly and irregular expenses.

Financially, we're in a very secure position, so I don't feel the need for many months of expenses in an EF. I'm a tenured professor, which isn't as guaranteed as many think it is but is still quite secure, especially since what I teach is one of the biggest majors at both mine and most universities and since there is a shortage of professors in my discipline. We have no debt, unemployment benefits in our state would cover all of our essential spending for the six months that the benefits last, and I have access to a 457 plan that I could access with no penalty as soon as I was separated from service to my employer (e.g. in the event of a job loss). We have very solid insurance in place, including an excellent LTD plan, and have two years of our health insurance's out-of-pocket maximum in our HSA, which we max out every year. Our saving rate is high enough that I could take a job making less than half what I earn now, and we'd still be fine.
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Re: Smarter approach to "emergency funds"?

Post by lostdog » Wed Mar 25, 2020 4:24 pm

mega317 wrote:
Wed Mar 25, 2020 4:13 pm
lostdog wrote:
Wed Mar 25, 2020 2:47 pm
If we have 11x our expenses in taxable but it's in Total US and Total International, do we need an emergency fund or am I wasting away the 6 months in cash?

I always struggle with this.
If you have 11x expenses in taxable then your 6 months in cash are 4% of your taxable account and likely much less than 4% of your whole portfolio. It doesn't matter what you do. That's probably why you struggle.
Good point.
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Re: Smarter approach to "emergency funds"?

Post by 1789 » Wed Mar 25, 2020 4:38 pm

Bryzzo2016 wrote:
Wed Mar 25, 2020 12:56 pm
Mine's in VTSAX. Seemed like a great strategy until 3 weeks ago.
this was funny you know that :D
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Re: Smarter approach to "emergency funds"?

Post by fatFIRE » Wed Mar 25, 2020 4:55 pm

I checked OP's claim for 2020. VASIX is down about 10% from the highest point. Looks legit. OP, I like this plan. Although I would push it to expect a 20% drop. With 20/80 stock bond, assuming 90% drop in stock, that leaves you at 18% loss, and no guarantee bonds won't lose a percent or two too.

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Re: Smarter approach to "emergency funds"?

Post by Waiting_for_Godot » Wed Mar 25, 2020 5:01 pm

Unladen_Swallow wrote:
Wed Mar 25, 2020 3:18 pm
lostdog wrote:
Wed Mar 25, 2020 2:47 pm
If we have 11x our expenses in taxable but it's in Total US and Total International, do we need an emergency fund or am I wasting away the 6 months in cash?

I always struggle with this.
If the stocks fall by 50%, how many times expenses will you have? It's a rhetorical question.

Emergency fund is often needed at times when your job and stocks are both down. 2000, 2008, 2020....
If you have a large taxable account that could fall from $2million to $1 million, and you would be happy withdrawing from it to live, then that is fine.

Emergency Fund for me is intended to be risk free. Because I will most likely need it when risk shows up in all other aspects of life.
Bucketing in this instance may help. Ideally, your EF would see a few years of gains prior to any drop that might require its use. If this isn't the case, then it's a matter of topping off from your still substantial non-EF taxable account as needed, which may feel less painful than completely selling low from your main account.

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Re: Smarter approach to "emergency funds"?

Post by FackKnope » Wed Mar 25, 2020 5:05 pm

Not sure what the US terminology would be for this, but in Canada, you can make your own "principal protected note." Outlined in this article: https://canadiancouchpotato.com/2012/06 ... cted-note/

From that:
1. Start by determining the current yield on six-year strip bonds. A strip bond (also called a zero-coupon bond) doesn’t make interest payments like a traditional bond. Instead, you buy it at a discount and it matures at face value. You can find a long list of them at any discount brokerage. Investment-grade strip bonds maturing in 2018 currently have an effective yield of about 2%.

2. Download this spreadsheet, which I’ve created to do the math for you. Fill in the three highlighted fields: the amount you wish to invest ($50,000), the number of years (6), and the yield on your strip bond (2%). The spreadsheet will give you a present value of $44,399. In other words, this amount compounded at 2% for six years will grow to $50,000.

3. Now it’s time to purchase the investments. Start by buying your strip bond in the amount of $44,399. Then use your remaining $5,601 to purchase an equity ETF such as the Horizons S&P/TSX 60 ETF (HXT), which tracks its index almost perfectly and conveniently reinvests all dividends.

Now, unless your bond defaults, you are guaranteed to have $50,000 in six years, plus some additional return that is tied to the performance of large-cap Canadian stocks. But unlike the structured note, there is no limit on that potential upside: your $5,601 will capture everything the index delivers, minus only the ETF’s minuscule fee.

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Re: Smarter approach to "emergency funds"?

Post by afan » Wed Mar 25, 2020 5:12 pm

We hold bonds, including cash, as part of our asset allocation.

Cash in a bank account protects against a big drop in the markets. It also serves as money that is readily available in an EMERGENCY. Not "learned of a need for cash on Friday after the markets close, sell on Monday, wait till Wed or Thurs for the sale to settle and cash available." Cash in a bank account, or some other account that is IMMEDIATELY spendable, is for true emergencies.

It also is accessible even if there is so much disruption that placing a trade and liquidating assets is not the quick and trivial undertaking it is in normal times.

Our immediately available cash is less than 6 months expenses but the asset allocation makes this plus the usually highly liquid fixed income considerably more than that.

Although we could sell stock into a severely depressed market if necessary, we manage unexpected expenses from the cash and short term bond allocation.
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Re: Smarter approach to "emergency funds"?

Post by Starfish » Wed Mar 25, 2020 5:40 pm

Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.

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Re: Smarter approach to "emergency funds"?

Post by willthrill81 » Wed Mar 25, 2020 5:46 pm

Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
As noted further up the thread, it's not mental accounting if there is a hard barrier between your EF and your portfolio (i.e. no rebalancing between the two).
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Re: Smarter approach to "emergency funds"?

Post by bck63 » Wed Mar 25, 2020 5:54 pm

One concern about OP's suggestion is the risk of capital gains taxes if/when the balanced fund changes allocations. I was in a target date fund in my taxable account last year and it generated a $1.77 per share LT capital gains when it adjusted its allocation to international stocks. It was an unpleasant surprise.

My taxable account is my emergency fund. I keep plenty of cash in Vanguard Treasury MMF, and about 25% in the S&P 500 Index Fund.

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Re: Smarter approach to "emergency funds"?

Post by ChrisBenn » Wed Mar 25, 2020 5:56 pm

Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.

So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.

And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).

Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?

As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)

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Re: Smarter approach to "emergency funds"?

Post by watchnerd » Wed Mar 25, 2020 6:02 pm

The Broz wrote:
Wed Mar 25, 2020 3:55 pm
I liked the idea that I came across a month or two ago. My understanding was that Taylor advocated for a two fund portfolio in taxable where the Total Bond Market was what you could not afford to lose and VTSAX (or maybe it was Total World) was everything else. Please correct me if I am off base.
There are a lot of variations on the idea of the 'risk portfolio' (what you can afford to lose) vs 'risk free portfolio' (what you can't).

William Sharpe actually puts publicly traded bonds in the 'risk' portfolio, and advocates a TIPS ladder for the risk free port.

Personally, I view my allocation as:

70% stocks / 15% long Treasures / 15% short TIPS + MM = 85% risk portfolio / 15% risk free

Because we're still working, but turning 50 this year, we define our "can't afford to lose / risk free" bucket as 5-6 years living expenses.

When we were younger, we had a separate EF, but once we got to the point of having seven figures in taxable, it didn't make a lot of sense to firewall the EF.
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Re: Smarter approach to "emergency funds"?

Post by Dominic » Wed Mar 25, 2020 6:27 pm

This is interesting.

I agree with other posters who noted that it's essentially creating two separate portfolios, but I do think this is a more efficient emergency fund. Diversification reduces risk. In this case, you're taking on some risk to principal in exchange for a reduction in inflation risk.

Looking at this from a tax-efficiency perspective, it would probably be better to hold this as a three-fund portfolio with US stocks, international stocks, and intermediate-to-long-term Treasuries separately rather than using the single fund. (A barbell of extended-duration Treasuries and a high-yield savings account is very compelling, in my opinion.)
FackKnope wrote:
Wed Mar 25, 2020 5:05 pm
Not sure what the US terminology would be for this, but in Canada, you can make your own "principal protected note." Outlined in this article: https://canadiancouchpotato.com/2012/06 ... cted-note/
I'm not sure about an ETF with dividend reinvestment (I'm sure they're out there), but you'd have to use CDs instead of Treasury zeros in the US. Our market for zero-coupon bonds is more or less non-existent.

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Re: Smarter approach to "emergency funds"?

Post by ScubaHogg » Wed Mar 25, 2020 6:30 pm

willthrill81 wrote:
Wed Mar 25, 2020 5:46 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
As noted further up the thread, it's not mental accounting if there is a hard barrier between your EF and your portfolio (i.e. no rebalancing between the two).
This.

I find you and I agree about a lot.
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Re: Smarter approach to "emergency funds"?

Post by Lee_WSP » Wed Mar 25, 2020 6:30 pm

I agree with the OP on the idea of "risking" some of the EF. However, we all need some amount of highly liquid assets (ie a high yield savings account). So, how much of those assets do we really need? 3 months? 6 months? Biggest emergency bill one can reasonably expect to have?

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Re: Smarter approach to "emergency funds"?

Post by glorat » Wed Mar 25, 2020 6:35 pm

Hi OP,

I read the comparison as 7 months lifestrategy vs 6 months cash. That's apples to oranges.

Would it be fairer compare 7 months lifestrategy vs 6/1 split of cash and TSM equities?

Then recompare the max drawdown a in both... The key metric for an ef IMO is the likelihood (hopefully zero) of going below those 6 months of buffer when you get laid off in a bear.

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Re: Smarter approach to "emergency funds"?

Post by whodidntante » Wed Mar 25, 2020 6:50 pm

willthrill81 wrote:
Wed Mar 25, 2020 12:36 pm
vineviz wrote:
Wed Mar 25, 2020 10:19 am
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
I entirely agree and have made a similar recommendation myself before. Back when we still had an EF of some size (we no longer have a real need for one), we invested 2/3 of it in Wellesley Income fund and left the remainder in hard cash stored securely.
How many rolls of toilet paper did you store securely? :wink:

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Re: Smarter approach to "emergency funds"?

Post by willthrill81 » Wed Mar 25, 2020 7:09 pm

whodidntante wrote:
Wed Mar 25, 2020 6:50 pm
willthrill81 wrote:
Wed Mar 25, 2020 12:36 pm
vineviz wrote:
Wed Mar 25, 2020 10:19 am
Slightly overfund the emergency fund and invest it in a very conservative balanced fund (e.g. a fund that is 20% to 30% stocks) such as the Vanguard LifeStrategy Income Fund (VASIX).
I entirely agree and have made a similar recommendation myself before. Back when we still had an EF of some size (we no longer have a real need for one), we invested 2/3 of it in Wellesley Income fund and left the remainder in hard cash stored securely.
How many rolls of toilet paper did you store securely? :wink:
Enough to make the fire marshal wet himself. :D
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Re: Smarter approach to "emergency funds"?

Post by watchnerd » Wed Mar 25, 2020 7:21 pm

Lee_WSP wrote:
Wed Mar 25, 2020 6:30 pm
I agree with the OP on the idea of "risking" some of the EF. However, we all need some amount of highly liquid assets (ie a high yield savings account). So, how much of those assets do we really need? 3 months? 6 months? Biggest emergency bill one can reasonably expect to have?
At a minimum, we keep enough highly liquid to cover tax liabilities.

Don't want to be forced to sell things to pay taxes.
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Re: Smarter approach to "emergency funds"?

Post by Silence Dogood » Wed Mar 25, 2020 8:04 pm

vineviz wrote:
Wed Mar 25, 2020 10:19 am
Most people seem to assume that the emergency fund should be placed in a VERY conservative savings vehicle, like a high-yield savings account or money market account. I don't necessarily agree.

The thing about an emergency fund is that it's dedicated use is to cover unexpected financial shocks. These events are, by definition, unpredictable and unusual. You might be laid off next month, or you could go five or six years without a true financial "emergency". Unfortunately, time is the true enemy of cash. Or, rather, inflation is the true enemy of cash.

$10,000 placed in Treasury bills at the end of 2008 has LOST 15% of its purchasing power since then. Put another way, if $10,000 was six months worth of expenses in 2009, your emergency fund is down to just five months now.

I've said previously that the emergency fund does NOT need to be entirely in cash instruments, just that the household have enough liquidity to persevere scenarios with a reasonable probability of occurring. There are various ways to accomplish this, and one that I think most people should consider as a smarter option is this:
Is a one month loss of purchasing power - over the course of 135 months - really that bad though?

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Re: Smarter approach to "emergency funds"?

Post by HappyJack » Wed Mar 25, 2020 8:38 pm

One thought
1. Determine what you set as your EF - this is your “floor”
2. Put that amount in safe vehicles. Don’t stretch for return here. You want safety.
3. Determine your overall AA. Count your “floor” in the fixed income amount. You can then add to both equities and fixed income but always keep your “floor” established.
4. Your “floor” might grow as your family grows.
5. As taxable and tax deferred sides of your portfolio grow keep bonds and fixed income on tax deferred side and you can rebalance to fit your AA over there if you sell taxable equities on the taxable side.

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Re: Smarter approach to "emergency funds"?

Post by vineviz » Wed Mar 25, 2020 8:49 pm

Silence Dogood wrote:
Wed Mar 25, 2020 8:04 pm
Is a one month loss of purchasing power - over the course of 135 months - really that bad though?
Perhaps not, but the difference between seeing your purchasing power shrink 15% versus grow by 40% feels like something many households would notice.
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Re: Smarter approach to "emergency funds"?

Post by Lee_WSP » Wed Mar 25, 2020 8:50 pm

vineviz wrote:
Wed Mar 25, 2020 8:49 pm
Silence Dogood wrote:
Wed Mar 25, 2020 8:04 pm
Is a one month loss of purchasing power - over the course of 135 months - really that bad though?
Perhaps not, but the difference between seeing your purchasing power shrink 15% versus grow by 40% feels like something many households would notice.
Which is why I've already subscribed to that strategy. Although, to be fair to the naysayers, I don't think I kept enough liquid cash.

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Re: Smarter approach to "emergency funds"?

Post by Unladen_Swallow » Wed Mar 25, 2020 9:11 pm

Triple digit golfer wrote:
Wed Mar 25, 2020 3:33 pm
Unladen_Swallow wrote:
Wed Mar 25, 2020 3:18 pm

If the stocks fall by 50%, how many times expenses will you have? It's a rhetorical question.

Emergency fund is often needed at times when your job and stocks are both down. 2000, 2008, 2020....
If you have a large taxable account that could fall from $2million to $1 million, and you would be happy withdrawing from it to live, then that is fine.

Emergency Fund for me is intended to be risk free. Because I will most likely need it when risk shows up in all other aspects of life.
If you don't mind me asking, what is your approximate portfolio size in terms of annual expenses? What is your AA and how large is your separate emergency fund?
I will admit that I don't keep track of how many multiples of expenses we have saved. Our "expenses" don't give us a real picture of our goals and responsibilities. But, here are approximate measures. A little more or less.:

One month ago:
24X Expenses (includes discretionary)
42X Expenses ("basic" expenses)
Emergency Fund - 12 months (stretchable a bit)


Today:
We have lost approximately a third-ish of our portfolio, so you can translate accordingly. Our Emergency fund is intact.

We intended to retire early (still plan to), so we are saving for a longer retirement period than typical, and setting up a cushion. In addition, we feel certain family responsibilities (and certain endeavours we support), so we continue to work and save with that in mind. My parents live overseas and are elderly. Overseas travel is a necessary expense for us, and can swing a lot.
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Re: Smarter approach to "emergency funds"?

Post by JoMoney » Wed Mar 25, 2020 9:16 pm

People have different risk preferences. I would prefer "emergency funds" (which would be a relatively small amount of the overall portfolio) to have no market risk at all, preferably not even relying on a functioning market. U.S. Savings Bonds, Bank MM/Savings Accounts, some CDs, maybe even some annuities, don't rely on a functioning market at all to get your money in an "emergency". Individual bonds might work as well, as long you're holding them to maturity, and not expecting your broker will be able to find someone else to buy them.
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Re: Smarter approach to "emergency funds"?

Post by Silence Dogood » Wed Mar 25, 2020 9:57 pm

vineviz wrote:
Wed Mar 25, 2020 8:49 pm
Silence Dogood wrote:
Wed Mar 25, 2020 8:04 pm
Is a one month loss of purchasing power - over the course of 135 months - really that bad though?
Perhaps not, but the difference between seeing your purchasing power shrink 15% versus grow by 40% feels like something many households would notice.
Well, it's all personal preference I suppose.

I prefer to keep my emergency fund in an FDIC-insured savings account. I haven't closely tracked how this has kept up with inflation, but I do know that I have enough in there to have covered my previous 6 months of expenses.

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Re: Smarter approach to "emergency funds"?

Post by Triple digit golfer » Wed Mar 25, 2020 10:04 pm

If it's so simple to just hold seven months instead of six, isn't it just as simple or simpler to add another month over every 135 months to keep up with inflation? For someone with $5k monthly expenses, it would require simply cutting expenses by less than $9 per week and always adding it to the fund. That seems much easier than starting with an extra month.

But again, like I said before, emergency plan, not emergency fund, is what's important.

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Re: Smarter approach to "emergency funds"?

Post by watchnerd » Wed Mar 25, 2020 11:40 pm

Triple digit golfer wrote:
Wed Mar 25, 2020 10:04 pm
If it's so simple to just hold seven months instead of six, isn't it just as simple or simpler to add another month over every 135 months to keep up with inflation? For someone with $5k monthly expenses, it would require simply cutting expenses by less than $9 per week and always adding it to the fund. That seems much easier than starting with an extra month.

But again, like I said before, emergency plan, not emergency fund, is what's important.
That's an incredible good point.

And you don't have to take the market risk of a -12% draw down like in 2008.
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Re: Smarter approach to "emergency funds"?

Post by MoneyMarathon » Thu Mar 26, 2020 12:01 am

watchnerd wrote:
Wed Mar 25, 2020 11:40 pm
Triple digit golfer wrote:
Wed Mar 25, 2020 10:04 pm
If it's so simple to just hold seven months instead of six, isn't it just as simple or simpler to add another month over every 135 months to keep up with inflation? For someone with $5k monthly expenses, it would require simply cutting expenses by less than $9 per week and always adding it to the fund. That seems much easier than starting with an extra month.

But again, like I said before, emergency plan, not emergency fund, is what's important.
That's an incredible good point.

And you don't have to take the market risk of a -12% draw down like in 2008.
Is it though? The comparison would have someone being able to regularly withdraw from an emergency fund if it goes up too much beyond 7-8 months of expenses, which sounds a lot nicer than having an ongoing expense to fund it.

Or, more realistically, you wouldn't have to add as much to it in order to keep up with lifestyle creep, since it grew over time.

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Re: Smarter approach to "emergency funds"?

Post by mbasherp » Thu Mar 26, 2020 12:06 am

Another aspect of this that I haven’t seen discussed is the fact that you can never know how much is enough in advance.

You can say 6 months is enough, but that doesn’t mean you are insulated from needing 12. You don’t know for sure what can happen.

You can say 5 years is enough and if you’re wrong “we’ll have bigger problems than money”. But that doesn’t mean the universe is barred from creating a 6 year perfect storm for you with society still intact.

At the end of the day, all hypothetical planning is essentially arbitrary. Life doesn’t follow our rules. That’s why I am firmly in the “good enough” camp with some I bonds and some high yield savings, followed by our taxable account, followed by retirement accounts, selling the house, etc... I do have a plan. I’ll never know for sure if it was enough until the end.
Last edited by mbasherp on Thu Mar 26, 2020 12:11 am, edited 1 time in total.

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Re: Smarter approach to "emergency funds"?

Post by HEDGEFUNDIE » Thu Mar 26, 2020 12:10 am

I’d like to think I was way ahead of vineviz on this one (for once!)

Why it’s a good idea to hold long term Treasuries as your emergency fund

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Re: Smarter approach to "emergency funds"?

Post by drk » Thu Mar 26, 2020 12:55 am


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Re: Smarter approach to "emergency funds"?

Post by watchnerd » Thu Mar 26, 2020 1:00 am

MoneyMarathon wrote:
Thu Mar 26, 2020 12:01 am

Is it though? The comparison would have someone being able to regularly withdraw from an emergency fund if it goes up too much beyond 7-8 months of expenses, which sounds a lot nicer than having an ongoing expense to fund it.

Or, more realistically, you wouldn't have to add as much to it in order to keep up with lifestyle creep, since it grew over time.
At least for me, it is.

It's a behavioral hack:

Having a risk-free asset that doesn't decline (or barely does) in bad markets helps me stay the course.
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MoneyMarathon
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Re: Smarter approach to "emergency funds"?

Post by MoneyMarathon » Thu Mar 26, 2020 1:13 am

watchnerd wrote:
Thu Mar 26, 2020 1:00 am
MoneyMarathon wrote:
Thu Mar 26, 2020 12:01 am

Is it though? The comparison would have someone being able to regularly withdraw from an emergency fund if it goes up too much beyond 7-8 months of expenses, which sounds a lot nicer than having an ongoing expense to fund it.

Or, more realistically, you wouldn't have to add as much to it in order to keep up with lifestyle creep, since it grew over time.
At least for me, it is.

It's a behavioral hack:

Having a risk-free asset that doesn't decline (or barely does) in bad markets helps me stay the course.
Sure, that makes sense.

I don't think anyone ever got rich investing a few months of expenses. No big deal either way.

bigfry
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Re: Smarter approach to "emergency funds"?

Post by bigfry » Thu Mar 26, 2020 1:38 am

Interesting viewpoint. I've always struggled with the concept of an emergency fund. I always understood that it's important to have fixed and liquid cash reserves in case of an emergency or job loss and I've always been taught that 6 months cash in a high yield savings account is the smartest way to keep an emergency fund on hand. The more I think about this it doesn't really make sense to keep a large amount of cash sidelined especially now that interest rates are now next to nothing in high yield savings. I might look into possibly keeping around 1 months expenses in my checking and 6 months expenses invested into VASIX.

Another thought I had is while it may take a day or two longer to access my emergency money it really doesn't matter too much because most "emergency expenses" I would end up putting on a credit card anyways which I would then pay off in full at the end of the month which would give me ample time to pull from my invested EF. Good post! :sharebeer
Keep it simple, stupid.

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Re: Smarter approach to "emergency funds"?

Post by Starfish » Thu Mar 26, 2020 2:49 am

ChrisBenn wrote:
Wed Mar 25, 2020 5:56 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.

So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.

And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).

Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?

As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)

I still don't understand why bother to add stocks to your EF and then inflate it, when you could use a an appropriate risk allocation and use the additional money to add to your main AA (retirement targeted).
What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
The reason to have short term investments is to avoid a drawdown in a crisis (like the pandemic we live). One avoids a drawdown by selling the asset with the best value (one reason I don't like retirement target funds). It could be short term investments or cash if both stocks and bonds are down, but not necessarily. Having another mixed fund increases the confusion. Now you ave to sell devalued stocks because they are in your EF.

The only time when I see this making sense is if most money are in tax advantaged accounts and only the EF is in an taxable account. Then it could make sense.

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Re: Smarter approach to "emergency funds"?

Post by james22 » Thu Mar 26, 2020 3:00 am

vineviz wrote:
Wed Mar 25, 2020 10:19 am
a household should have enough financial capital withstand unexpected shocks (either a period of unemployment/underemployment or a major unplanned expenses) without undue stress.
Setting aside unemployment/underemployment (as that is so specific to the individual), and assuming most repair/replacements have been budgeted as expenses and medical expenses insured, what major unplanned (voluntary) expenses are left?

I prefer to borrow for such emergencies if they arise rather than save for them (since they may not).

I've no emergency fund.

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Tamarind
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Re: Smarter approach to "emergency funds"?

Post by Tamarind » Thu Mar 26, 2020 6:38 am

KlangFool wrote:
Wed Mar 25, 2020 10:59 am
OP,

I would offer a counterpoint to your idea.

In my opinion, my cash/cash equivalent serves another purpose besides an emergency fund. It is a separate asset class by itself. It helps/protects me from short-term deflation.

Diversification is a good thing.

KlangFool
This is an interesting thought from up thread that I didn't see addressed. OP, how would you expect your proposal to compare to cash during a short deflationary period?

I also wonder if there's a difference between doing what you propose and simply increasing one's cash EF annually to account for inflation.

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vineviz
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Re: Smarter approach to "emergency funds"?

Post by vineviz » Thu Mar 26, 2020 7:36 am

Tamarind wrote:
Thu Mar 26, 2020 6:38 am
This is an interesting thought from up thread that I didn't see addressed. OP, how would you expect your proposal to compare to cash during a short deflationary period?
My proposal is still 80%+ in nominal bonds, so pretty well insulated from deflation I'd say.
Tamarind wrote:
Thu Mar 26, 2020 6:38 am
I also wonder if there's a difference between doing what you propose and simply increasing one's cash EF annually to account for inflation.
Increasing the cash EF to account for inflation is saying that the household must have a higher savings rate. It seems to me that most households could find a more productive use for that money than replenishing an emergency fund that is losing purchasing power.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Jags4186
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Re: Smarter approach to "emergency funds"?

Post by Jags4186 » Thu Mar 26, 2020 7:50 am

vineviz wrote:
Wed Mar 25, 2020 12:34 pm
Jags4186 wrote:
Wed Mar 25, 2020 12:25 pm
Right now my wife and I have two $25,000 CDs paying 1.75% at Ally and we'll each get $250 bonus for holding that money in there for 3 months. That gives us a 5.75% return for 3 months. At the end of the 3 month period we'll jump into another deal elsewhere.
Sounds like an interesting hobby, but it's a level of active management/musical chairs that doesn't appeal to everyone.

My post is aimed at people who possibly don't have so much time on their hands.
In fairness, the amount of effort put into composing the original post and acting on it probably took as much time as it did for me to “actively manage” what I do for the past 2 or 3 years with far better results. $50k in VASIX from 2017-2019 gave you $9305. My $50k got me over the same time period earned me $16,144.72 in interest :moneybag

Granted, my method doesn’t scale well. If I had $100k I wouldn’t have been able to get $32,288 in interest. But I think for most people the juice is worth the squeeze.

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Re: Smarter approach to "emergency funds"?

Post by KlangFool » Thu Mar 26, 2020 8:00 am

vineviz wrote:
Thu Mar 26, 2020 7:36 am
Tamarind wrote:
Thu Mar 26, 2020 6:38 am
This is an interesting thought from up thread that I didn't see addressed. OP, how would you expect your proposal to compare to cash during a short deflationary period?
My proposal is still 80%+ in nominal bonds, so pretty well insulated from deflation I'd say.
Tamarind wrote:
Thu Mar 26, 2020 6:38 am
I also wonder if there's a difference between doing what you propose and simply increasing one's cash EF annually to account for inflation.
Increasing the cash EF to account for inflation is saying that the household must have a higher savings rate. It seems to me that most households could find a more productive use for that money than replenishing an emergency fund that is losing purchasing power.
In a deflation, the interest rate may go negative. Nominal bond loses money. Cash makes money.

KlangFool
Last edited by KlangFool on Thu Mar 26, 2020 9:02 am, edited 1 time in total.

alluringreality
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Re: Smarter approach to "emergency funds"?

Post by alluringreality » Thu Mar 26, 2020 8:38 am

Tamarind wrote:
Thu Mar 26, 2020 6:38 am
I also wonder if there's a difference between doing what you propose and simply increasing one's cash EF annually to account for inflation.
The main risk of this plan is probably an inflationary environment. Investments that might fall into the category of cash, like T-Bills, I Bonds, TIPS, high yield savings, etc. would probably be expected to outperform bonds and some stocks during inflation. Other assets like gold and commodities might also perform well during inflation. There is the risk of both bonds and stocks both losing value at the same time, which has happened recently, but generally inflation is the main area where there might be a better chance of an emergency fund primarily invested in bonds losing value with time.

The market is essentially heavily betting against inflation at this time. With the US dollar being a reserve currency, people typically don't expect inflation in the US. On the other hand, Goldman Sachs indicated "“Event-driven bear markets have typically emerged with fairly modest inflation", although the comment should be taken with some skepticism since "None of the event-driven bear market examples from history were triggered by a virus or other disease outbreak". If I had to bet on either inflation or deflation, I'd probably take deflation similar to the current bond market. As long as inflation isn't an issue, this plan might earn some amount more (3% real seems unlikely to me) than a plan that considers inflation. Personally I'm not worried about trying to squeak out the absolute maximum gains on my money in the current bond market, so I'm willing to leave a portion of my account to perform better during unexpected inflation.
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Re: Smarter approach to "emergency funds"?

Post by redmaw » Thu Mar 26, 2020 9:01 am

Jags4186 wrote:
Thu Mar 26, 2020 7:50 am
vineviz wrote:
Wed Mar 25, 2020 12:34 pm
Jags4186 wrote:
Wed Mar 25, 2020 12:25 pm
Right now my wife and I have two $25,000 CDs paying 1.75% at Ally and we'll each get $250 bonus for holding that money in there for 3 months. That gives us a 5.75% return for 3 months. At the end of the 3 month period we'll jump into another deal elsewhere.
Sounds like an interesting hobby, but it's a level of active management/musical chairs that doesn't appeal to everyone.

My post is aimed at people who possibly don't have so much time on their hands.
In fairness, the amount of effort put into composing the original post and acting on it probably took as much time as it did for me to “actively manage” what I do for the past 2 or 3 years with far better results. $50k in VASIX from 2017-2019 gave you $9305. My $50k got me over the same time period earned me $16,144.72 in interest :moneybag

Granted, my method doesn’t scale well. If I had $100k I wouldn’t have been able to get $32,288 in interest. But I think for most people the juice is worth the squeeze.
Can you explain how you made $16k in 3 years on 50k collecting $250 bonuses? With 2 accounts getting that each quarter you are talking about 2k per year, for 6k in 3 years. The other 10k came from normal interest? On 50k that would be what 6% plus the bonuses? I can't make that work, it seems like the bulk of the interest you are reporting is missing. I guess prior bonuses may have been more lucrative. Either way setting up 8 new accounts a year sounds like a royal pain.

nigel_ht
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Re: Smarter approach to "emergency funds"?

Post by nigel_ht » Thu Mar 26, 2020 9:04 am

ScubaHogg wrote:
Wed Mar 25, 2020 6:30 pm
willthrill81 wrote:
Wed Mar 25, 2020 5:46 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
As noted further up the thread, it's not mental accounting if there is a hard barrier between your EF and your portfolio (i.e. no rebalancing between the two).
This.

I find you and I agree about a lot.
I noticed that while my losses in my main portfolio are high (70/30) it didn’t bother me at all while the small losses in my “safe” allocations that are part of the EF bothered me a lot.

I said screw it and moved it to cash even though I knew it was silly but doing so let me emotionally ignore the ups and downs of the market except for what I was playing with for fun.

Dollar wise the losses in the main portfolio dwarfed the EF but mental accounting FTW!

ChrisBenn
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Re: Smarter approach to "emergency funds"?

Post by ChrisBenn » Thu Mar 26, 2020 9:14 am

Starfish wrote:
Thu Mar 26, 2020 2:49 am
ChrisBenn wrote:
Wed Mar 25, 2020 5:56 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.

So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.

And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).

Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?

As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)

I still don't understand why bother to add stocks to your EF and then inflate it, when you could use a an appropriate risk allocation and use the additional money to add to your main AA (retirement targeted).
What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
How would that work if a persons taxable savings was 30k (with a 30 year investment horizon) and their ef was 30k?

You would have to adjust your overall AA to manage risk - and every time you contribute to your savings (with a longer investment horizon than the ef) you would have go recompute your target aa. If you bucketed the two funds this would happen implicitly.

Once your EF does't move the needle on your savings AA (when the latter is much larger) then that strat is fine if one prefers it - doesn't make a big difference either way at that point.

redmaw
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Re: Smarter approach to "emergency funds"?

Post by redmaw » Thu Mar 26, 2020 9:30 am

I tend to agree with the OP, but I think he doesn't take it far enough. Sure you should have money available to cover an emergency, but there is no reason this money needs to be low yield assets, or cash. As long as you can get to it in a few days, and there is enough, you have the emergency covered. Notice how neither of these requirements mentions how risky the assets are? The common wisdom is you don't want it in stocks because you are most likely to need the money when stock are down. But so what if stocks are off their highs? Let's say I need 20k tomorrow, and all I have are stocks. Those stocks may have been worth 30k a month ago. So withdrawing after a 35% drop cost me 10k. How long does it take for 20k in stocks to earn 10k more than 20k in cash? I'm guessing that comes out to 6-10 years depending on your return assumptions. So over your 60 years of investing, how many times do you think you need to talk that emergency fund? I can almost guarantee that the drag of holding a large cash fund for that long is going to be more expensive than selling stock during an emergency.

My personal strategy? I keep low 5 figures in my checking + savings for normal use and don't hesitate to draw it very low if something comes up, like I need a car or a furnace. I also keep about 1/3 of my investments in a taxable account where I can get them if I need them even though I haven't maxed out all of my tax advantaged space. My brokerage and 401k are 100% stock (I know risky right, my circumstances allow this, don't the this into an argument about aa) though my wife's thrift account does have some g fund.

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Re: Smarter approach to "emergency funds"?

Post by watchnerd » Thu Mar 26, 2020 9:41 am

Starfish wrote:
Thu Mar 26, 2020 2:49 am

What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
The reason to have short term investments is to avoid a drawdown in a crisis (like the pandemic we live). One avoids a drawdown by selling the asset with the best value (one reason I don't like retirement target funds). It could be short term investments or cash if both stocks and bonds are down, but not necessarily. Having another mixed fund increases the confusion. Now you ave to sell devalued stocks because they are in your EF.

The only time when I see this making sense is if most money are in tax advantaged accounts and only the EF is in an taxable account. Then it could make sense.
That's exactly what I do. See sig.
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Jags4186
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Re: Smarter approach to "emergency funds"?

Post by Jags4186 » Thu Mar 26, 2020 9:48 am

redmaw wrote:
Thu Mar 26, 2020 9:01 am
Jags4186 wrote:
Thu Mar 26, 2020 7:50 am
vineviz wrote:
Wed Mar 25, 2020 12:34 pm
Jags4186 wrote:
Wed Mar 25, 2020 12:25 pm
Right now my wife and I have two $25,000 CDs paying 1.75% at Ally and we'll each get $250 bonus for holding that money in there for 3 months. That gives us a 5.75% return for 3 months. At the end of the 3 month period we'll jump into another deal elsewhere.
Sounds like an interesting hobby, but it's a level of active management/musical chairs that doesn't appeal to everyone.

My post is aimed at people who possibly don't have so much time on their hands.
In fairness, the amount of effort put into composing the original post and acting on it probably took as much time as it did for me to “actively manage” what I do for the past 2 or 3 years with far better results. $50k in VASIX from 2017-2019 gave you $9305. My $50k got me over the same time period earned me $16,144.72 in interest :moneybag

Granted, my method doesn’t scale well. If I had $100k I wouldn’t have been able to get $32,288 in interest. But I think for most people the juice is worth the squeeze.
Can you explain how you made $16k in 3 years on 50k collecting $250 bonuses? With 2 accounts getting that each quarter you are talking about 2k per year, for 6k in 3 years. The other 10k came from normal interest? On 50k that would be what 6% plus the bonuses? I can't make that work, it seems like the bulk of the interest you are reporting is missing. I guess prior bonuses may have been more lucrative. Either way setting up 8 new accounts a year sounds like a royal pain.
Oh I do way more than 8x $250 bonuses a year. But at minimum 8/year should do you pretty well.

I guess it’s only a pain if you see it as such. It’s a mini version of owning a rental. Sure there’s work involved but it’s pretty manageable if you have a system. Also it’s 0 risk so there’s that.

Starfish
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Re: Smarter approach to "emergency funds"?

Post by Starfish » Thu Mar 26, 2020 3:42 pm

ChrisBenn wrote:
Thu Mar 26, 2020 9:14 am
Starfish wrote:
Thu Mar 26, 2020 2:49 am
ChrisBenn wrote:
Wed Mar 25, 2020 5:56 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.

So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.

And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).

Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?

As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)

I still don't understand why bother to add stocks to your EF and then inflate it, when you could use a an appropriate risk allocation and use the additional money to add to your main AA (retirement targeted).
What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
How would that work if a persons taxable savings was 30k (with a 30 year investment horizon) and their ef was 30k?

You would have to adjust your overall AA to manage risk - and every time you contribute to your savings (with a longer investment horizon than the ef) you would have go recompute your target aa. If you bucketed the two funds this would happen implicitly.

Once your EF does't move the needle on your savings AA (when the latter is much larger) then that strat is fine if one prefers it - doesn't make a big difference either way at that point.
So the problem is the obsession over AA? AA is a guideline. It should change as your conditions change (and if market changes if you ask me).
Is it that hard to have an AA made of 30K cash and 70/30 for the rest? You fill the EF part and then keep contributing to the LT one.
Even the partition EF/LT is also mental accounting. There are 3 asset classes and all of them can be used in an emergency, not only the cash. If I were laid off 3 months ago I would have sold stocks because they were very appreciated instead of using the cash. Now I might use cash because stocks are down.

ChrisBenn
Posts: 254
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Re: Smarter approach to "emergency funds"?

Post by ChrisBenn » Thu Mar 26, 2020 4:41 pm

Starfish wrote:
Thu Mar 26, 2020 3:42 pm
ChrisBenn wrote:
Thu Mar 26, 2020 9:14 am
Starfish wrote:
Thu Mar 26, 2020 2:49 am
ChrisBenn wrote:
Wed Mar 25, 2020 5:56 pm
Starfish wrote:
Wed Mar 25, 2020 5:40 pm
Mental accounting.
Your AA it's what it is. The point of having an emergency fund is to have a liquid safe investment that can used short term.
Picking a subset of that AA with random allocations and call it an emergency fund does not make any sense.
If by AA you mean "allocation I have determined based on risk tolerance, investment horizon, etc" - then that will typically be slated to a retirement goal (at list that's the assumption I'm working with here). The risk tolerance/investment horizon for an EF are probably different.

So now you have to determine what your new target AA should be based on two factors - EF usage, and retirement. It's hard enough to do it based on one - blurring two almost opposing use cases is just going to blur the AA/risk tolerance estimate more.

And, ultimately, if you nailed it, the AA would effectively be the same as your overall (as measured AA) with an appropriate emergency fund + retirement taxable. It actually seems more likely to produce a correct outcome to estimate each independently. At that point averaging them together with a fund size weight gives you your new target AA - but you now should reset that each time you contribute (since the EF is more of a fixed and not percentage allocation).

Or you can just ignore all of that and keep it in two funds; that actually seems much simpler to me?

As mentioned before, if your taxable is so much greater than your emergency fund that the inclusion of the latter doesn't move the needle on desired AA then sure, roll it together (but honestly at that point it doesn't matter much what you do). But for people who aren't at that point the bucketing approach still seems much easier/simpler. (Unless you consider your risk tolerance/investment horizon the exact same for a EF vs. your retirement taxable)

I still don't understand why bother to add stocks to your EF and then inflate it, when you could use a an appropriate risk allocation and use the additional money to add to your main AA (retirement targeted).
What stops your from having a 3 portion AA (stocks, long term bonds and short term investments) and sell them accordingly when the need appears. If one asset is down sell the other... it goes in the direction of rebalancing.
How would that work if a persons taxable savings was 30k (with a 30 year investment horizon) and their ef was 30k?

You would have to adjust your overall AA to manage risk - and every time you contribute to your savings (with a longer investment horizon than the ef) you would have go recompute your target aa. If you bucketed the two funds this would happen implicitly.

Once your EF does't move the needle on your savings AA (when the latter is much larger) then that strat is fine if one prefers it - doesn't make a big difference either way at that point.
So the problem is the obsession over AA? AA is a guideline. It should change as your conditions change (and if market changes if you ask me).
Is it that hard to have an AA made of 30K cash and 70/30 for the rest? You fill the EF part and then keep contributing to the LT one.
Even the partition EF/LT is also mental accounting. There are 3 asset classes and all of them can be used in an emergency, not only the cash. If I were laid off 3 months ago I would have sold stocks because they were very appreciated instead of using the cash. Now I might use cash because stocks are down.
I think keeping the EF as a separate bucket (when it's not a trivial percentage of your retirement taxable assets) makes sense, no disagreement there. I think the 30k as cash, and a retirement horizon AA for the rest is great as a default/baseline.

So then we come to the proposition brought up by vinevize, using a conservative asset allocation for your EF (potentially with slight overfunding to account for volatility) - this could be considered a potential evolution of the the above. There are tradeoffs there, so it's not for everyone, but I think there are valid arguments for it (that were laid out in the op)

My only point of argument with the discussion here (and apologies if I misinterpreted your post) was the notion that it makes more sense to roll some or all of the EF into your retirement AA. For people with a 5 figure EF and 7 figure taxable retirement AA absolutely that's fine. But if you are in the early accumulation stage I believe it's just much simpler to bucket it. Consider a person who wanted a 20/80 AA for their EF (30k), and a 90/10 allocation for their retirement taxable AA (30k). So they start out with 6k equities / 24k bonds for the EF and 27k equities / 3k bonds for retirement. Or 33k/27k. Now their next paycheck comes in, what do they purchase to maintain their AA? As part of the calculations you have to back out the 20/80 (30k) EF portion first. Pretty trivial sure, but just seems pointless you you can keep it in two separate buckets to begin with?

I agree,not a big difference, but I wasn't arguing it was wrong, I was arguing that the bucketing approach wasn't wrong.

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