Cash Is King

May 1, 2025

The recent market volatility has led to more frequent conversations about cash savings and the importance of setting up an emergency fund.

From where I sit, most of us spend too much time thinking about intraday changes to portfolio values, and not enough time on the more boring aspects of good financial behavior. Building up an emergency cash reserve is one of the simplest things you can do to avoid financial pain down the road. Like everything else, it just takes time and discipline.

But wait, you ask, aren’t you investment advisors? What does having a few shekels under the mattress have to do with indexing? In short, it’s about risk management. At its core, a good emergency fund isn’t about what you can do with it, but what you can avoid having to do. For instance, if you’re still working, there’s a good chance you’ll have an unexpected career change at some point.¹ It’s far preferable to be in a position where you can wait for the job you want versus having to take the first thing that comes along. If you’re at or near retirement, a good cash position can help you avoid untimely portfolio withdrawals during periods of volatility like we’ve had recently.

What makes for a good emergency fund?

• It’s for emergencies. If you have cash reserves but are consistently drawing on them, they’re not an emergency fund. Carefully differentiate between emergencies and uncategorized expenses. Your car suddenly needs a new transmission? Yup. Those airline tickets to see dear Aunt Mabel going on sale? Doesn’t pass the test.
• It provides immediate liquidity. Talk to your advisor about setting aside additional 0-3 month Treasury ETFs in your brokerage account. Short-term Treasuries are often classified as ‘cash equivalents.’ (Berkshire Hathaway has $300 Billion of them on their balance sheet).[2] Alternately, consider a Money Market or High Yield Savings Account at your credit union. Remember, access is more important than yield. Getting 4.5% on a 24-month CD is great, until you need the money in a pinch.
• It’s right sized to your specific needs. If your budget is $10k/month and you have $10k in reserve, you don’t have a lot of runway. On the other hand, cash reserves that are too large can lead to overall portfolio underperformance. There’s a sweet spot between a safety net and cash drag.

How much is enough? Rather than a set dollar amount, think about it in terms of time. How long do you need to know for certain that you can pay your bills without drawing on your investments? (Forever is dreamy, but unrealistic). For most folks, this is 2-3 months. You can back into the right amount from there.

- Seth Gillim

What I’m reading this week: Table For Two, by Amor Towles. Maybe it’s because he used to work as an investment banker before pivoting to writing fiction, but I absolutely adore Amor Towles. I love books by former Wall Street types who show that one can appreciate finance as well as history, art and culture. Having an interest in the numbers isn’t a zero-sum game.

1. INTOO. “19 Fascinating Stats on Layoff Anxiety [Infographic].” INTOO , https://www.intoo.com/us/blog/19-fascinating-stats-on-layoff-anxiety-infographic/
2. “Warren Buffett Now Owns 5% of All US Treasury Bills, a Larger Holding Than the Fed Itself.” The Economic Times, 24 Apr. 2025, economictimes.indiatimes.com/markets/stocks/news/warren-buffett-now-owns-5-of-all-us-treasury-bills-a-larger-holding-than-the-fed-itself/articleshow/120583054.cms.