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A large cash emergency fund is not a good idea. Prudent cash management reduces the need for one.

First of all, one should have a credit card (or credit cards) with large credit limits. As long as you don't use the credit, it costs you nothing but you have it handy as a cash management tool.

Second, one should have a margin account with the broker. Again, the margin costs you nothing as long as you don't borrow but it is there as a cash management tool for when you need it.

Now that you have your tools lined up, here is how you use them. You pay everything you can with the credit card and pay it off monthly so as not to have any credit charges. I pay mine with an ACM transfer from my brokerage account. In an emergency you have lots of instant credit available. Should you have such an emergency, put it on the card and pay off the card with margin from your broker. The card credit (about 15 days) is going to be free. Of course, now you have margin debt and you should start pruning the portfolio to pare it down and it can be done in an orderly fashion.

Better yet, don't have emergencies. LOL

Denny Schlesinger
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