Friday, September 10, 2010

Hit to the Emergency Fund

Mr. Sam has been talking about doing some trading (stock trading) outside our 401ks and outside our IRAs. He wants to make more money and he thinks he can do so via the market. Mr. Sam has an MBA and he is a numbers guy, an analyst, so I have been encouraging him to investigate, contemplate, research want he wants to do.

Well last week when the market was down, we pulled $5,000 from the emergency fund (so the September numbers are not accurate) and he/we invested it all in one stock in a non-tax advantaged trading account.

I have decided that going forward I'll track it on my numbers updates. But, that means we are down $5,000 in our emergency fund and down $5,000 for our 2010 savings goals. Mr. Sam thinks we should keep counting it as part of both but I disagree.

I am not super happy about this move, but I want Mr. Sam to participate more in our personal finances, he has the MBA, he has the numbers brain, so I voted in favor (remember that any financial move over $300 has to be agreed to in our family) and we will see how it goes.


Alex said...

I'm sorry, but that was a terrible move by Mr. MBA. Anyone investing in today's market (especially someone with 2 years of business background) needs to recognize the benefits of diversification. Dumping $5,000 into a stock (I'm assuming all at once) is not investing, it's gambling. I hope you're not counting that money as savings, because it can be lost quite quickly. (This is from someone who had a diversified portfolio with stocks such as BP and others, which all went way down after the BP news. Believe me, anything can happen in the market even if you're diversified.)

JKC said...

I am not as negative as Alex (above). I would love to hear how Mr. Sam (the MBA numbers guy) does with his $5,000 seed money. Like you, my main investment vehicle is rental property, but I have been curious about diversifying. I understand Mr. Sam's impulses. Please do follow up on this and let us know how it goes.


Brandon said...

Hi Sam,

I'm a relatively new follower of your blog, mostly because I've been thinking of putting together a similar personal finance style website and couldn't resist commenting on this entry.

First, you both seem to be in a relatively stable and successful financial situation. In the grand scheme of your finances, a $5000 investment is hardly a gamble. I agree with your conservative philosophy calling the $5k a "hit" to the emergency fund as this money is no longer as liquid as it once was. I hope you'd be willing to share what fund/company you invested in, as I'm always looking for ideas of my own.