Investing emergency fund: How much drag of bond in taxable account?

[pnw_guy]

I've been finally convinced in other posts on this site that I should invest my emergency fund. So, I'm going to go ahead and move my 6 months of emergency money out of a high interest savings account that earns just north of 1% interest.

The question is how I should invest this money in a taxable brokerage account. I'm trying to decide between two options:
1. 100% in a Vanguard total stock market index fund
2. A Vanguard balanced fund with 60% total stock market index and 40% total bond market index.

What I like about the first option is that it obviously will give the greatest growth in the long term, and it's the most tax efficient. What I about the second option is that it sacrifices growth potential, but should provide a less volatile ride so that I can have emergency money on hand in case I need it (or opportunity money in case a fantastic money making opportunity comes along). The downfall of the second option is that the bond component makes it less tax efficient.

So, does anyone know how much drag the loss in tax efficiency will have on my account? Any other ideas on how to think through these options? My thinking is that the second option isn't ideal, but is much better than earning a measly 1%.

[Radagast]

Look up the fund prospectus, it will have an example of after tax returns for the highest federal tax bracket for various periods. Beyond that you will need to look up the fund’s distributions of interest, dividends, and capital gains and calculate it yourself.

There is a similar tax managed balanced fund that may work better for your situation, or perhaps you prefer vwalx the muni high yield fund which has behaved like a 70% bond 30% stock fund (and also like an intermediate investment grade corporate bond fund), and probably better after taxes.

[pnw_guy]

I like the idea of used tax efficient balanced funds from Vanguard.

Anyone else who has invested their emergency fund want to share where the money is invested? Have any thoughts or advice on my plan?

As one additional option, I do have a mega backdoor Roth option at my work, but instead of investing the emergency fund there I kind of like the flexibility of a taxable account.