And that’s why percentage of invested assets matters.
If your efund is 50% of your invested assets, you’re probably near the beginning of your working career and a layoff is somewhat likely in a downturn. So if that happens, you could burn through all of your assets in the time it takes to find a new job, and that sucks. If your efund is 10% of your invested assets, losing half of your efund won’t really matter all much because you have other assets to back you up. But also having 10% of your invested assets in secure investments also won’t drag your growth all that much since a 90/10 stock/bond split has almost identical performance vs 100/0. If it’s significantly <10% of your invested assets, you’re nearly or already capable of retiring and don’t need an efund anymore (2% is that magic number assuming a 6 month efund).
I personally am in a single income family with kids, so having cash to pay for necessities is really important to me. In fact, I had 12 months when I was working as a consultant, which I’m glad for because COVID killed all of my contracts and nobody was hiring, so I lived on that cash for the better part of a year. When I was single, my efund was much smaller because I had the option of moving back home, sleeping on a friend’s couch, etc if things went sideways.
So the more screwed you’d be if you lost your job, the more of your efund you should have in cash.
I personally keep about 3-6 months of expenses in tbills, and I have a taxable brokerage account with more assets if necessary. I also keep about a month of expenses in cash in my money market funds as slush between paychecks. Other than that, the rest of my assets are in stocks, as in, pretty much 100% stocks in a 70/30 domestic/international split. I happen to need <10% of my assets for my efund, but I’m still unwilling to part with it because it saved me when I lost my job (and the phenomenal returns right now certainly help). So I just count it as the bond portion of my portfolio and call it a day.