24 - Emergency Fund Sizing for the Enterprising Investor
Release Date: 04/28/2019
Please review and rate the podcast
If you enjoyed this podcast and found it helpful, please consider leaving me a review. Your feedback helps me to improve the podcast and grow the show's audience.
Support the Podcast on Patreon
This is a podcast supported by listeners like you. If you’d like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron.
You can find out more information by listening to episode 11 of this podcast.
Emergency Fund Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode24
Emergency Fund Sizing:
- Recommended Size: 1 year
- Mainstream Alternatives:
- 3 months
- 6 months
- Liquidity is all-important for investors
- Value investing requires managing risk and accepting volatility
- Lack of liquidity can cause you to sell investments when your stocks are undervalued and priced too low
- A strong emergency fund protects you from this possibility
Where should you store it? (Hint: Maximize Safety)
You should maximize the safety of your emergency fund. Don't worry about maximizing the rate of return you receive.
Store your emergency fund in a government guaranteed account. This can be with either an FDIC-insured savings account. I believe Ally Bank is a good option.
A great alternative is TreasuryDirect.gov where you can lend money directly to the US government. Emergency Fund money would obviously need to be invested only in short-term government bonds. (3 months or less to maturity)