The issue with keeping your emergency fund in an index fund is that the odds of your own personal crisis coinciding with a more widespread crisis is high.
I got furloughed in April 2020. Had my emergency fund been in index funds, I would have had to realize all those market losses in order to use my emergency fund, which would have meant my emergency fund would have been a fraction of what it actually was since it was in a savings account.
Emergency fund money should be in a HYSA at least if not index funds.
Terrible advice.
Emergency money literally must be liquid or it is not, by definition, emergency money.
HYSA is liquid. Index is one step away from liquid
Not at minimum keeping it in a HYSA is losing 5% per year
The issue with keeping your emergency fund in an index fund is that the odds of your own personal crisis coinciding with a more widespread crisis is high. I got furloughed in April 2020. Had my emergency fund been in index funds, I would have had to realize all those market losses in order to use my emergency fund, which would have meant my emergency fund would have been a fraction of what it actually was since it was in a savings account.