[wenc]

Most financial advisors tell you to keep a rainy day fund with a 3-6 month runway.

Given what's been happening in the tech industry and the economy at large, I now keep a 1-year emergency fund in a money-market fund at 4% (Fidelity SPAXX). I'm probably losing out on some growth (SP500 grew 11% over the past year, despite the massive drop in April 2025), but at least I have liquidity in case I get laid off.

That's the kind of game I feel I have to play these days.

[sarchertech]

If you only have a little more than a year in total assets that probably makes sense.

But if you have much more than that, there’s no reason to keep an entire year in such a low return investment.

Money in say an S&P500 ETF can be liquid in 1-3 days.

[wenc]

SP500 can go down a lot and stay down for a long time.

We went through this in 2022 when most stocks were down 20% for a year. SP500 is not a low risk short term investment.

How would you feel if your rainy day fund lost 20% of its value?

[beisner]

I think OP is speaking about people who have 5x or more than their current salary in equities, where even a 50% temporary drop in assets will have no meaningful effect in lifestyle (and a long-term 50% drop in S&P would be apocalyptic, bigger fish to fry).

[wenc]

I think that's a bet that is contingent upon not getting laid off for more than a year during a period when there is 20-30% drawdown. If that happens, then any growth differential between equities and SPAXX's 4% is going to be wiped out -- in which case it was better to have stayed with SPAXX which offers liquidity and modest but stable growth at near zero risk.

It's not a sure win rule.

A better strategy is to hedge (bet maybe 3 months of your 1 year emergency runway), but that requires some acumen.

[sarchertech]

>A better strategy is to hedge (bet maybe 3 months of your 1 year emergency runway), but that requires some acumen.

Yeah that’s what I was suggesting when I said you don’t need keep your entire 1 year emergency fund in low risk investments (assuming you have much more than a year of runway).

[casper14]

Same! Still good that you can get 4% on a risk free investment these days

[anotherhue]

Or put another way, your income is depreciating at at least 4%.

[aitchnyu]

Umm, my search engine says US inflation was 4.7 percent in 2021, 8 in 2022, 4.12 in 2023, 2.9 in 2024, 2.4 this year. Will you choose this in the 4+ percent years too?

[wenc]

Did you also check 7 day yields (interest) in those years? SPAXX is currently 4%. But was 5% in previous years (it holds US treasuries and has a very low expense ratio and holds its NAV)

https://fundresearch.fidelity.com/mutual-funds/summary/31617...