Quote:
Originally Posted by sweeps
An argument for having a cash EF is you don't want to cash out your stocks and mutual funds at an inopportune time. Usually you will lose your job during a recession -- the exact time your stock holdings may have dropped. Essentially you'd be taking a double hit to your net worth by liquidating your stocks when they are temporarily down.
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I think liquidity is of importance when talking about an EF.
On two other boards, there is a discussion of using HELOCs as the EF. Now with the credit crunch, getting a new HELOC is tougher and the existing HELOC limits are being reduced.
Cash is king when money is needed. Credit is bad, because if the debt is "called", then the credit really wasn't a huge help.
I do not advocate having more than 3 months expenses in cash. People with a 6 month EF would be wiser to put half their EF in something with around a 6% return (short term bond fund, or 40-60 balanced fund for example).
In addition the interest from the EF should get invested in something with that 6% return too.