Stop Loss Securities as Savings/Emergency Funds safe?
Stop Loss Securities as Savings/Emergency Funds safe?
Is it safe to treat stocks and ETFs in my brokerage account as savings and emergency funds as long as I have a significant number of lots with a Stop Loss or Stop Limit Order in place? My Savings Account technically doesn't cover 3 months of expense, but combined with my brokerage account it does. Is it safe to be have 1 month in savings and 2 months in stock/ETF with stop loss orders in place that if exercised equate to 2 months of expenses?
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This is generally not advisable, as it would mean you are likely to end up selling during a market downturn, at a significant discount.
Willingness to take risks is one thing but ability to take risks is another one. In you case, since you need the funds in case of emergency, your ability to take risks is 0.
So your options are limited to riskless assets such as CDs, govt bonds, savings accounts, etc.
As you grow your assets and portfolio, naturally, some part of your portfolio will be invested into bonds, and some part into equity. In that situation, you will be able to count the bonds portion, specifically riskless ones, as part of an emergency fund, provided they are liquid and of small duration. But in the meantime, savings account would probably be the way to go