So, let's assume you're right (I'm not sure you are, but I have to think on it for my case...), to paraphrase what you are saying:It really sounds to me like your EF is not sized to cover the 90th percentile unplanned expenditure, because you're worried about dipping into stocks to cover an emergency. In that situation, I'd probably increase your EF (if you think you need to double it, then it's definitely undersized now).
If I want more emergency fund (or, the way I'm looking at it now, an emergency to my emergency fund....but I guess that's all semantics), then whatever I do to increase those holdings I simply should not consider it part of my core 80/20 split. So if currently say my EF was 5% of assets, and I wanted to hold another 5% in taxable bonds just in case, then there is no issue with that per-se, but I should then rebalance the remaining 90% for the 80/20 split. If this means I then hold 25% bonds total I shouldn't consider that as really 25%, but just the 20%?
If so, that makes sense, although mentally and behavior wise I would still strive to not have to touch that extra 5% put aside, so it is a bit hard for me to see it separate. That said, desiring a 20% bond split but actually having 25% counting the backup fund I hope to never touch does give me a bit closer to the "recommended" split for someone my age.
That said, and I think going back to your point of risk tolerance. If I am going to take that extra 5% and put it in the "backup" EF, then bonds vs stocks vs money market shouldn't make much of a difference? I should mostly look here to what my risk tolerance is as well as possible tax advantages (dividends vs interest)?
Statistics: Posted by JackInTheBoxer — Thu Feb 12, 2026 2:56 pm — Replies 4 — Views 637