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?
I would agree with the other comments that this is probably a risky idea. 90% of the time it will hold up fine without a problem, but given that the money is allocated as an emergency fund, it should be liquid and stable to help you during times of instability. I would argue that 90% isn’t good enough for this purpose.
There are currently quite a few high yield savings accounts or even money market funds with interest rates around 5%. IMO, with that level of guaranteed return, it is hard to justify putting emergency funds into any higher risk investments.
One other point to consider with stop loss and stop limit orders is that they typically only execute during market hours. It’s not unusual for the market to make big swings overnight or over weekends. In the event of a major market change, there is a good possibility that the order would execute far from the limit that was set. That in addition to the execution queue times in a sell off scenario could result in lower prices than you expect. Not to mention also the possibility of a circuit breaker stopping trading altogether if conditions are bad enough.
TL:DR do whatever you want with the rest of your money, but don’t risk your lifeline for the chance of gaining a couple extra bucks.