Author Topic: Good funds for general purpose emergency fund  (Read 1833 times)

ender

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Good funds for general purpose emergency fund
« on: February 01, 2018, 09:33:45 AM »
Debating moving our emergency fund as well as additional mortgage principal into a dedicated taxable account.

I'm not really sure the best fund for this though.  Was even thinking something like a 2015 target retirement fund like this could work (it's about a 40-60 stock/bond mix).

Rob_bob

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Re: Good funds for general purpose emergency fund
« Reply #1 on: February 01, 2018, 02:08:02 PM »
Are you saying you want to put your emergency savings in the market, or that you have excess money in an emergency fund and want to invest it?

Emergency money shouldn't be in the market, but your current emergency fund might be too large and that you could invest.

ender

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Re: Good funds for general purpose emergency fund
« Reply #2 on: February 01, 2018, 04:08:36 PM »
Are you saying you want to put your emergency savings in the market, or that you have excess money in an emergency fund and want to invest it?

Perhaps both?

Quote
Emergency money shouldn't be in the market

Why? Would be easy to double and make the taxable account have more money in it to mitigate risk significantly.



retireatbirth

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Re: Good funds for general purpose emergency fund
« Reply #3 on: February 01, 2018, 06:41:28 PM »
Sounds fine to me. I keep 3 month's liquid in cash and then an extension of 6-9 months invested in bonds.

GGNoob

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Re: Good funds for general purpose emergency fund
« Reply #4 on: February 01, 2018, 07:17:20 PM »
I chose M1 Finance for investing my emergency fund/savings. I do 24% VTI (Vanguard Total Stock Market), 16% VXUS (Vanguard Total International), and 60% VTEB (Vanguard Tax-Exempt Bond). M1 lets you slice and dice as much as you want and doesn't charge any fees.

Radagast

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Re: Good funds for general purpose emergency fund
« Reply #5 on: February 01, 2018, 08:30:37 PM »
The Target Retirement 2015 fund will merge into Target Retirement Income fund in a few years, might as well just use that. Note that these have a lot of bonds = tax drag. Some others along those lines:
+VASIX Balanced Income (20/80) Least return, 2nd smallest 2009 drawdown
+VTINX Target Retirement Income (30/70) has a 5th slice of TIPS, yay. One of my top two choices of these four.
+VSCGX Conservative Growth (40/60) Greatest return, greatest risk.
+VWAHX High Yield Tax Exempt Bond (0/100): Lowest drawdown, second highest return at 25% tax rate, less stock/credit risk but more interest rate sensitivity than the others. I actually use this.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=1985&firstMonth=1&endYear=2018&lastMonth=12&endDate=02%2F01%2F2018&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&benchmark=-1&benchmarkSymbol=VWALX&symbol1=VASIX&allocation1_1=100&symbol2=VTINX&allocation2_2=100&symbol3=VSCGX&allocation3_3=100

In case you missed it, here is a current discussion on this. I learned that I want a Consumers Credit Union Rewards Checking account, which is stable and returns 4.6% if you make enough transactions with their debit and credit cards (which I'm sure keeps lots of people away). Others had their own opinions.
https://forum.mrmoneymustache.com/investor-alley/what-do-you-guys-recommend-for-investment-of-'emergency-fund'-besides-ally/

Cycling Stache

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Re: Good funds for general purpose emergency fund
« Reply #6 on: February 03, 2018, 07:29:40 PM »
Are you saying you want to put your emergency savings in the market, or that you have excess money in an emergency fund and want to invest it?

Perhaps both?

Quote
Emergency money shouldn't be in the market

Why? Would be easy to double and make the taxable account have more money in it to mitigate risk significantly.

The question is confusing because it's actually a little ambiguous.

If you have no other accessible funds, then the emergency fund shouldn't be invested in the market.  The idea of an emergency fund is how much you might need in case of emergency.  If that amount is down 20% in the market, you don't have enough for the emergency.

If you have accessible funds sufficient to cover an emergency, then the question is really whether you're okay that you might have to pull e.g., $10,000 from your after-tax account after the market has dropped 20%, thus costing you a couple grand.  If you expect only rarely to have an emergency, then I would think that's an acceptable tradeoff to just put it all in the market.

We don't have an emergency fund.  I can cover most stuff by charging on the credit card and paying it off by the due date, and as backup, we have a home equity line of credit (never used, but available) and could sell funds from our Vanguard taxable account.