Could it be a good idea to have an investment emergency fund?
I'm sure everyone is aware of the idea of a 'normal' emergency fund where you have some cash set aside in-case of an emergency like your car or fridge breaking down.
It's a good idea for every adult to have at least $1,000 set aside for emergencies, but for families it could make sense to have between three to six months of household expenses to protect against something like a job loss.
Investment emergency fund
I've made up the name, but the concept is somewhat similar. The cash would just sit there unused whilst you go about your normal investing until needed.
I find it difficult to sit on large amounts of cash for an extended period of time, I prefer to regularly invest in the best opportunity each time cash becomes available.
But that approach means I would have little to nothing available to invest on days like today. If I had a separate amount of money waiting for days where the market falls by over 1% then I'd always have some money spare to buy some beaten-down share opportunities.
It wouldn't need to be a large fund, just a single 'parcel', so if $1,000 is your usual investment amount then that's all you need to keep in your bank account which can be ready to invest through your, for example, Commonwealth Bank of Australia (ASX: CBA) CommSec brokerage account.
That way, you're not keeping too much of your capital as cash and missing out on the best returns of shares, but you also have the opportunity to buy shares on a bargain day like today.
Foolish takeaway
Luckily, I've managed to buy some shares today at a good price thanks to my bit of cash that I had ready to go.
