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.
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.
HYSA is liquid. Index is one step away from liquid