Author Topic: Process for Liquidating the "Emergency Fund"  (Read 3440 times)

johnsonran

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Process for Liquidating the "Emergency Fund"
« on: June 09, 2013, 08:22:59 PM »
What would you do? Here are the nuts and bolts:

75% of actual dollars saved annually with no debt whatsoever...life is single as well as simple and always will be since I am male and have never fancied women :P

Anyway ,I have 20K currently with a big bank HYS earning less than 1% APY.

I have another 3K in a separate savings account but want to reduce this to $500 as monthly monetary crises virtually never occur anymore. Plus with three credit cards, it would be simple to buy time should a real emergency occur.

My employer sponsered 401K program is with Vanguard which I max out my annually and Roth IRA is held in the same location also maxed.

I do have a taxable brokerage account setup with Vanguard with a $0 balance. All savings outside of the 22K are in retirement accounts.

I need VIGAX to properly balance my portfolio which is currently weighted otherwise due to limited 401K offerings ect and my concern with the poor negotiation of my company on expense ratios *sigh*...but I digress

At any rate, the market is in record high territory and I am concerned about buying at the top of the market with this amount of money. Would you wait for a good injection point, or just dump it in and not worry about it or do something else entirely. I need to correct this as well as the 30% of my 401K I have in short term reserves currently(MM).

At what point you go about liquidating the "emergency fund", to increase the rate of return by investing in a Vanguard index Fund like described above? Hopefully the question is clear?

Thanks
« Last Edit: June 09, 2013, 08:32:00 PM by johnsonran »

KingMe

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Re: Process for Liquidating the "Emergency Fund"
« Reply #1 on: June 09, 2013, 08:27:57 PM »
What?

aj_yooper

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Re: Process for Liquidating the "Emergency Fund"
« Reply #2 on: June 09, 2013, 09:02:53 PM »
Cosider using the technique of value averaging.  Here is a link:  http://www.investopedia.com/articles/stocks/07/dcavsva.asp

There are many more links, such as at Bogleheads.  Personally, I would keep a little more for an emergency fund than what you are planning.  Good luck.

johnsonran

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Re: Process for Liquidating the "Emergency Fund"
« Reply #3 on: June 09, 2013, 09:35:41 PM »
Thanks, just out of curiosity what would that number be and where would you keep it for liquidity sake? I was under the impression that most mustachians viewed emergency funds as essentially wasteful employees?

Also DCA would not enable me to buy into the admiral shares version of a new fund due to not having met the minimum requirements, in this case 10K. The lower expense ratio is on the table.
« Last Edit: June 09, 2013, 09:41:47 PM by johnsonran »

dragoncar

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Re: Process for Liquidating the "Emergency Fund"
« Reply #4 on: June 09, 2013, 10:11:56 PM »
I wouldn't DCA, I'd just invest it lump-sum (unless you have a great track record of market timing).

Inevitably, the market would tank immediately after I invested. 

aj_yooper

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Re: Process for Liquidating the "Emergency Fund"
« Reply #5 on: June 10, 2013, 04:04:34 AM »
Thanks, just out of curiosity what would that number be and where would you keep it for liquidity sake? I was under the impression that most mustachians viewed emergency funds as essentially wasteful employees?

Also DCA would not enable me to buy into the admiral shares version of a new fund due to not having met the minimum requirements, in this case 10K. The lower expense ratio is on the table.

I suggested value averaging, which is different from dollar cost averaging, to mitigate buying the funds at a peak.  You have solved much of your own when to buy problem if you insist on starting with Admiral funds.  You can buy a fund and add to it; when you have enough to change to Admiral, Vanguard offers that choice.  The expense ratio difference for a short period of time is not that much, IMO.  Have you formulated a written asset allocation plan?  Bogleheads or William Bernstein books can help with that, if you are interested.

For an emergency fund, I keep 2-3 times our monthly expenses in a checking account; it helps with cash flow and general house maintenance issues.  I use credit cards (mostly a Fidelity AE) for the points and to help with monitoring expenses.  For bigger things, I might use my home equity line of credit, but not often.  Best wishes.

johnsonran

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Re: Process for Liquidating the "Emergency Fund"
« Reply #6 on: June 10, 2013, 08:09:00 AM »
Thanks for the great feedback guys. Vanguard has a great and detailed portfolio analyzer which examines your investments in relation to the market as a whole. It is a great tool. I do know what asset allocation I am most comfortable with and it is fairly aggressive as it is still early on. I am not sure I fully understand VCA at the moment but will keep reading. Two months is approximately 3K in reserve for me, so the bulk of this still needs to be moved. Thanks
« Last Edit: June 10, 2013, 08:10:47 AM by johnsonran »