Never had an emergency fund nor wanted one. Sounds like cash drag to me.
Yeah, hence the question. My forecasted returns really skew one way or another depending on how much cash I plan to keep out of the market long-term. I just started playing with the numbers of having a big emergency fund VS a small emergency fund, and the differences over the course of 10 years are substantial.
MMM has a video about this. He basically suggests the emergency fund is unnecessary. Check it out: https://www.youtube.com/watch?v=tFpJrqp0l_4&app=desktop
Thanks for sharing that! Didn't realize MMM was doing newer content on Youtube... interesting. That said, I have read all of this info from MMM before in older blog posts.
I didn't realize my discussion of "emergency fund" was implying that I'd be keeping my money in the 0% bucket. That seems ultra-stupid--you should at least keep it in a 2% money market savings account. I keep around $1,000 in my checking account, and the rest of my easily-accessible cash in a 2% savings account.
My plan a few months back was to open a HELOC, which he recommends at the end of the video too. But I just sold my house so that's no longer an option.
The motivation of this question is that if there's a drop in the market
and you have an emergency, you don't want to be selling shares in order to cover that emergency.
Then some people would say, "that's why you diversify into bonds." But as I just opened a taxable brokerage account for the first time and have been researching which assets I want to hold in that account, the clear wisdom is that it's better to hold your bonds in a tax-advantaged account and NOT a taxable account. But if I hold my bonds in my SEP IRA or ROTH IRA and not my brokerage account, that means I can't as easily sell off my bonds and access that capital.
Which brings me back full circle to keeping cash in a money market savings account in case something happens.