24 - Emergency Fund Sizing for the Enterprising Investor
The DIY Investing Podcast · Trey Henninger: Private Investor, Portfolio Manager, Business Strategist, and Value Investing Expert
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Show Notes
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Emergency Fund Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode24
Emergency Fund Sizing:- Recommended Size: 1 year
- Mainstream Alternatives:
- 3 months
- 6 months
- $1,000
- $10,000
- Liquidity is all-important for investors
- Value investing requires managing risk and accepting volatility
- Lack of liquidity can cause you to sell investments when your stocks are undervalued and priced too low
- A strong emergency fund protects you from this possibility
You should maximize the safety of your emergency fund. Don't worry about maximizing the rate of return you receive.
Store your emergency fund in a government guaranteed account. This can be with either an FDIC-insured savings account. I believe Ally Bank is a good option.
A great alternative is TreasuryDirect.gov where you can lend money directly to the US government. Emergency Fund money would obviously need to be invested only in short-term government bonds. (3 months or less to maturity)