Where to Keep Reserves - Brokerage vs. Other

Question

I've recently reached my savings goal and am ready to purchase a property in the near future. I currently have funds saved up for a 5% down payment, closing costs, and some small repairs right out of the gate. These are saved in my checking account so the cash is immediately available.

I also have around 5-6 months in potential mortgage payments saved in a brokerage account run by a robo advisor in case of long term vacancies or any larger major repairs are needed.

My question is, since I'm about ready to purchase, would you recommend pulling my money out of the brokerage account and into a checking account so that it is readily available and doesn't risk fluctuating in value? Or since the money in the brokerage account is just for emergencies, should I just leave it in there to allow it to potentially grow, further padding my reserves overtime?

(It's worth noting I do have other personal cash reserves and even if my brokerage account would fall 25% in value short term, this wouldn't be too big of a blow)

Thanks!

Robert McCormick · Answer

@Shanti S. I was stating I would be ok with a 25% loss in general as far as my risk tolerance goes. My brokerage account is currently run by a robo advisor so it's my understanding it automatically rebalances my portfolio for me so I don't need to worry about adding stop losses for specific securities, ETFs etc. It will automatically sell once each ETF falls below a certain threshold and will reinvest for me.

I plan on keeping the expenses in a checking as well, but the 7.4% APR sounds awesome. I just sent you a DM about the 7.4% for more info.

Shanti S. · Answer

Why would you be ok with a 25% loss in your brokerage account?  Do they not allow stop losses?

I'm currently parking most of my cash in equities but on at least a weekly basis I update all stop loss orders to minimize losses should the market take a sudden volatile turn.

Moved the rest of my cash from checking account to Gemini in NY, they're paying 7.4% APR with no lockup, so it's also very liquid.

These days I only keep monthly expense money in my credit union.

Robert McCormick · Answer

I'll look into continuously rolling over the money in a 30-day CD, I've never thought of that before. If the CD rates don't look sufficient I'll most likely keep it in the brokerage account then. It's reassuring though to know that it's not uncommon for others to stash their reserves in a brokerage account. I appreciate the input @Brad Hammond

Brad Hammond · Answer

Hi @Robert McCormick, It sounds like you have your down payment/closing costs liquid which is key.  Beyond that, I have always kept my reserve money in a brokerage account.  It kills me to have cash just sitting there not doing anything.  If you want something in between you could put some money in a CD account.  It won't give you much return but if you put it in a 30-day CD and have it continually roll over, you will more or less be able to access it when you need extra funds.