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Emergency Fund 6 Month Review

|Includes: EMCI, Intel Corporation (INTC), KMI

Personal financial planning prophecies 3 to 6 months worth of income to be kept in an emergency fund. Most recommend to keep the funds readily available in fixed-income securities. I do not really subscribe to this theory. I have a taxable brokerage account that I use to maintain the funds. My rationale for this is because I know that within less than 72 hours I can have requested funds.

Currently I have three stocks (INTC, EMCI, KMI) with some cash as shown in the table.

Emergency Fund
Stock Weight (%)
EMCI 74.76
INTC 12.68
KMI 12.56
Cash 4.40

The overall yeild on the portfolio is 3.24%. This is one reason why I keep my emergency fund in a portfolio of dividend paying stocks. I carry a credit card that has a sizeable credit limit allowing for emergency purchases. Otherwise, most emergencies I would have at least 3 days to obtain the needed funds.

To generate an increase in available funds, I will use options. Back on May 17, 2016, I sold a put option on INTC (29 JUN17) for a net gain of $27.46 or 0.9% gain. This trade can go three ways: 1) INTC goes out of business and I owe $2900; 2) INTC closes below $29 on June 17 and I will owe $2900 for 100 shares for net $2872.54; and 3) Option expires worthless and I keep the $27.46.

This was the first trade of this type for 2016 mainly because I just do not have the time to research and complete the trade with my work and personal life schedule, but I am trying to make changes to be more devoted to my investments.

6/14/16 Update: Bought back the INTC 29 PUT for $1.03 with fees. Net gain was $26.43 or 0.9% risk/reward or 10.9% annual yield.

For the year I have lost $610.75 due to the purchase of KMI back in November 2015 right before the price drop after the reduction in dividend payment. I simply did not do the due diligence I should have. However, I do expect it to start to increase the dividends in the next year.

Feel free to share your comments on how I manage my emergency fund. In full disclosure I do work for EMCI.

Kent A.

Disclosure: I am/we are long INTC, EMC, KMI.

Additional disclosure: I work for EMCI.