Picking great companies for the long run

[ValueNZ]

And what % of your investment capital would you be selling at a loss for an emergency?

How much is enough for an emergency fund?

It probably doesn't need to be a lot, maybe the equivalent of a few months worth of expenses? It would suck for example if the stock market took a downturn, and you lost your job and were required to sell your investments at a large loss. Besides that it may give some people piece of mind. Really dependent on each individual.

[justakiwi]

Yes, it does depend on one’s individual circumstances. If you are a very small investor, you definitely don’t want to have to sell shares (possibly at a loss) in the event of an emergency. I have always had an emergency fund for this reason. If you have a high value portfolio, and have been investing for many years, then yes, you could probably afford to sell some shares without it having a significant impact on your holdings.

My view is the same, but depends on individual circumstance I guess.

If a real emergency you not going to mind perhaps having to sell shares at the wrong time.

Over a lifetime this strategy will work way better than having a cash stash.

[Valuegrowth]

Normally, I hardly keep money in the bank. With my past experince I deciced to keep some emergency funds. I think I will need some funds during next 5 years. However, I am ready to make use of those emergency funds If I see life time opporunity in the market.

Emergency Fund is for emergencies ,right?
How often are emergency funds needed & for how long?
How soon would you need the money?

My view is that listed shares are a liquid asset than can be sold as and when required for an emergency. Money in the bank in 2 days.

Better to stay 100-100+% invested & make that money work for you.

Overdrafts/revolving credit are also handy in an emergency or if an opportunity comes along

[iceman]

It probably doesn't need to be a lot, maybe the equivalent of a few months worth of expenses? It would suck for example if the stock market took a downturn, and you lost your job and were required to sell your investments at a large loss. Besides that it may give some people piece of mind. Really dependent on each individual.

It would also suck to lose out on big capital gains in the sharemarket to keep money in the bank for emergencies that may or may not ever happen. I'm with kiora on this. Listed shares are in most cases very liquid and easy to sell and money can be quickly realised in an emergency or an unforeseen circumstance.

[kiora]

It probably doesn't need to be a lot, maybe the equivalent of a few months worth of expenses? It would suck for example if the stock market took a downturn, and you lost your job and were required to sell your investments at a large loss. Besides that it may give some people piece of mind. Really dependent on each individual.

Mindset
If you had to sell shares for an emergency you wouldn't be selling them at a "loss".
You would be selling them for what they are worth.

It might be when an emergency comes along you would be selling them for a "profit"

What is the likelihood of a "profit" or a "loss" as you have called it

https://www.cascadefs.com/history-of...d-bull-markets

My view is its important to remember shares are liquid assets. Money can it the bank account quicker than if you had to break a term deposit.

Maximizing Investment returns includes maximizing the size of the investment with as much of your own capital as possible and even better, outside capital, if it can be borrowed at a economic rate.

[kiora]

If borrowing through RC or OD to invest

"Borrowing money
for your company
Given a choice, it’s safer for a company to borrow
money than its shareholders.
Inland Revenue has argued, successfully, that interest
paid on money borrowed by shareholders for their
company is not a tax deductible cost for the company. This
is because the company didn’t borrow the money.
Many companies have been caught out by this and had
the unpleasant surprise of discovering interest had not been
a tax deductible cost for some years. Inland Revenue has
disallowed the expense, increased the taxable income and
collected extra tax, together with a hefty Use of Money
Interest charge.
It’s easy for an accountant not to notice the money has
been borrowed by the wrong people.
So if your company needs to borrow money, make sure
it’s indeed the company that does the borrowing.
If you find a loan is in your name, you can still do
something about it.
● Lend the money to the company and charge interest
for the loan. The interest charged needs to be based on
market and charging the same as the bank is charging is
acceptable and the simplest. Unfortunately if the interest
the company pays (excluding interest to banks) exceeds
$5,000 in an income year RWT will have to be deducted
and paid.
● An alternative is the money could have been borrowed
as agent for the company.
In both cases the paperwork matters. Get professional help
and get it right."

The borrower needs to be the entity investing

https://59980eee-9c21-4822-bb0f-d8f9...5971b05412.pdf

[ratkin]

I always keep 20k in normal day to day bank account, but am struggling to think what sort of emergency would urgently need it for. Nice to have a bit of a float though.
As for term deposits etc, I like to have lots of smaller ones so that One is never far from maturing. While shares are very liquid anyway.

[ValueNZ]

Mindset
If you had to sell shares for an emergency you wouldn't be selling them at a "loss".
You would be selling them for what they are worth.

It might be when an emergency comes along you would be selling them for a "profit"

What is the likelihood of a "profit" or a "loss" as you have called it

https://www.cascadefs.com/history-of...d-bull-markets

My view is its important to remember shares are liquid assets. Money can it the bank account quicker than if you had to break a term deposit.

Maximizing Investment returns includes maximizing the size of the investment with as much of your own capital as possible and even better, outside capital, if it can be borrowed at a economic rate.

Are you a believer in efficient market hypothesis? Price=value 100% all of the time?

[kiwikeith]

Are you a believer in efficient market hypothesis? Price=value 100% all of the time?

Nope - If the efficient market hypothesis was valid Warren Buffet could not outperform a monkey throwing darts at Wall Street Journal. Both would be selecting perfectly valued shares.

[davflaws]

Since my retirement, we have been gradually selling down our portfolio - little by little as large expenses crop up. I have always held OCA and HGL as long term investments and reinvested dividends. I have also had a variety of "punts" PEB, BLT, TSK, PAZ, with relatively small proportions of the total portfoliio.

When the transmission blows up, we decide on the long awaited ensuite, or a new deck (seriously), I sell a few of my "punts" - the last 200,000 BLT will be next. I think that strategy is a lot better than waiting 30 days for a Kiwibank "Notice Saver" deposit to be released.