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Stop Loss Securities as Savings/Emergency Funds safe? (lemmy.world)

submitted 1 year ago by Copernican@lemmy.world to c/personalfinance@lemmy.ml

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Is it safe to treat stocks and ETFs in my brokerage account as savings and emergency funds as long as I have a significant number of lots with a Stop Loss or Stop Limit Order in place? My Savings Account technically doesn't cover 3 months of expense, but combined with my brokerage account it does. Is it safe to be have 1 month in savings and 2 months in stock/ETF with stop loss orders in place that if exercised equate to 2 months of expenses?

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[–] deconstruct@lemm.ee 4 points 1 year ago

It's not as safe as you think. In normal situations, market orders fill almost instantly.

If the market drops below your threshold due to major news, like the Covid shutdowns, your sell order will enter a queue. Depending on the ability of your brokerage to execute orders in competition with the rest of the market, your sell order may complete quickly, or not. You're potentially taking a huge loss.

I'd recommend building up your savings account. Getting more than 4.5% in a risk-free HYSA is an easy choice in this case.