Author Topic: How common is it here to have an E-Fund in ETFs?  (Read 592 times)

deek

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How common is it here to have an E-Fund in ETFs?
« on: February 12, 2020, 10:02:04 AM »
I'm just curious about ETFs and wondering if some here think it's a good idea to place savings in an accessible account buying ETFs. I'm talking low-volatility funds from well-respected and longer term fund managers. What say you? I think it beats putting money in a savings account that gets you 1.6 APY.

HBFIRE

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #1 on: February 12, 2020, 03:38:26 PM »
High yield checking, ranges from 3.3-4%......best option I've found.

jim555

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #2 on: February 12, 2020, 04:12:32 PM »
Why would you need an e-fund at all?  You have multiples of years of expenses saved up just sell some stocks / bonds or break a CD.

American GenX

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #3 on: February 12, 2020, 05:04:59 PM »
Why would you need an e-fund at all?  You have multiples of years of expenses saved up just sell some stocks / bonds or break a CD.
Yep, nothing in my portfolio is designated as an e-fund.  Everything comes from the stache pool as needed.

js82

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #4 on: February 12, 2020, 06:31:41 PM »
In practice, anything that you can liquidate and access quickly works for an emergency fund.

Have as much money accessible immediately(savings/high-yield checking) as you would need within a couple days or less.  Once you get to time horizons of a few days or more, selling assets from a generic taxable investment account works just fine.

Laura33

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #5 on: February 13, 2020, 07:03:24 AM »
Once you get to time horizons of a few days or more, selling assets from a generic taxable investment account works just fine.

Until it doesn't, because the market crashes.  Sure, you can liquidate anyway, but then you're locking in your losses.

The point of an E-fund isn't to get you the best possible gains.  It's to be there reliably when the shit hits the fan so you don't need to tinker with your longer-term investments and potentially mess up your larger plan.  The thing is, bad shit tends to be correlated more than anyone realizes.  A bad economy triggers layoffs, which triggers a slide in the property market in that area, forcing you to move for a new job right when you can't sell your house.  A credit crunch hits across the country, and your HELOC and credit lines get cut in half when you're in the middle of rebuilding the entire back half of your house, even though you still have an 800+ credit score.  A market crash sinks both stocks and bonds (so much for the "safety" of bonds, right?).  Stagflation means unemployment hits 9% and inflation hits 11%, and mortgage rates spike to 16%.*  Etc. etc. etc. 

And the best part is that we, as humans, are so tremendously bad at predicting what the next giant walking FUBAR is going to be.  All we can say with certainty is that there will be one, but we have no idea how or why.  It is sheer hubris to think otherwise.

So, again:  the point of an e-fund is to be there for you when you are one of the people on the wrong side of whatever particular FUBAR decides to hit next.  It is to protect your downside risk, not maximize your upside gains.  High-yield savings or money market is fine; personally, I wouldn't venture beyond that.

*All of these things have happened to me.  Some more than once.


deek

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #6 on: February 13, 2020, 07:18:42 AM »
Once you get to time horizons of a few days or more, selling assets from a generic taxable investment account works just fine.

Until it doesn't, because the market crashes.  Sure, you can liquidate anyway, but then you're locking in your losses.

The point of an E-fund isn't to get you the best possible gains.  It's to be there reliably when the shit hits the fan so you don't need to tinker with your longer-term investments and potentially mess up your larger plan.  The thing is, bad shit tends to be correlated more than anyone realizes.  A bad economy triggers layoffs, which triggers a slide in the property market in that area, forcing you to move for a new job right when you can't sell your house.  A credit crunch hits across the country, and your HELOC and credit lines get cut in half when you're in the middle of rebuilding the entire back half of your house, even though you still have an 800+ credit score.  A market crash sinks both stocks and bonds (so much for the "safety" of bonds, right?).  Stagflation means unemployment hits 9% and inflation hits 11%, and mortgage rates spike to 16%.*  Etc. etc. etc. 

And the best part is that we, as humans, are so tremendously bad at predicting what the next giant walking FUBAR is going to be.  All we can say with certainty is that there will be one, but we have no idea how or why.  It is sheer hubris to think otherwise.

So, again:  the point of an e-fund is to be there for you when you are one of the people on the wrong side of whatever particular FUBAR decides to hit next.  It is to protect your downside risk, not maximize your upside gains.  High-yield savings or money market is fine; personally, I wouldn't venture beyond that.

*All of these things have happened to me.  Some more than once.

Noted, thanks!!

habaneroNorway

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #7 on: February 13, 2020, 07:26:06 AM »
The return on your e-fund sitting in a bank account, short-term bond fund, T-bills, CDs or whatever can be very high. Hopefully it is never, but the day it saves you from Doing Something Stupid the returns can be quite spectacular compared to the alternatives.

jim555

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #8 on: February 13, 2020, 11:07:15 AM »
e-funds are for non-FIRE people with no savings.  Dedicating any amount to dead money is a lose proposition.  That dead money will go on for years and every year you are loosing.  It isn't even needed, just sell something or borrow against a brokerage account if you want to.  I don't see the logic at all in this idea.

ChickenStash

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Re: How common is it here to have an E-Fund in ETFs?
« Reply #9 on: February 13, 2020, 11:30:38 AM »
I'm in with the camp that doesn't differentiate between e-fund money and invested money.

I usually have some float money in my checking account and high limits on my CCs for "need it now" requirements, but anything past a few days will come from the main heap that's invested.