Putting everything into stocks in the #1 way people panic sell and lose money.
The safe way to split your savings
Thinks of money in 3 bucket:
Bucket 1: Emergency fund – 30% to 50% of savings
Keep this in savings/FD. 3-6 months of expenses.
Why: If you lose your job or have medical bills, you don’t want to sell stocks when market is down 30%.
Bucket 2: Short term goals <3 years – 20% to 30%
House down payment, wedding, car next year.keep this in FDs, Treasury bills, or money market. stocks are too risky for<3 years.
Bucket 3: Long-term investing – 20% to 50%
Money you won’t to touch for 5-10+ years this goes into stocks/ETFs. this is the only part that should be in the market.
What happen if you invest 100%
Market crashes 40% like 2008 or 2020. you lose you job same month. now you are forced to sell stocks at the bottom just to pay rent. that’s how people get destoryed.
