An uncomfortable truth is that getting retrenched and losing your job is a real possibility in this uncertain environment. If it happens, you’ll need to rely on your savings as well as other forms of income. Now consider the scenario where you have a five- or even six-figure investment portfolio, across a mix of ETFs and stocks, and about one month’s salary sitting in a savings account. On paper, you would look stable, even in the event of retrenchment. An investment portfolio worth tens of thousands is something most Singaporeans would be happy to have.
But in practice, such a portfolio cannot immediately solve your most immediate problems: even without your job income, you will still need to pay next month’s mortgage, your insurance premiums, your children’s school fees, and your household bills. Compounding these concerns is the likely possibility that the market has been underperforming for two months or more. In this scenario, your portfolio may be worth less than it was, and you will lock in those losses permanently if you sell any of them now. This is the dilemma that separates financial net worth from financial resilience, and it’s an important distinction that needs to be acknowledged.
Losing Your Job = Cash Flow Problem
The financial impact of retrenchment is immediate and specific. It’s a real-life gap between the money coming in, which has practically gone down to zero, and the money going out, which should not have changed at all. All those fixed expenses, like rent or mortgage repayments, utilities, groceries, insurance premiums, transport, and children’s expenses, don’t pause while you are searching for a new job. This is exactly why the emergency fund and the investment portfolio serve different functions in your financial life. Trying to compare them purely based on returns misses the point entirely. An emergency fund exists to cover this potential (and immediate) income gap while an investment portfolio exists to grow wealth over time.
The job search in Singapore typically takes somewhere between three and six months, depending on the industry and seniority level. In the current environment, it’s not uncommon to hear people searching for up to 12 months before securing a role. That is a meaningfully long period during which your fixed expenses keep running. If you have enough accessible liquid cash to cover at least six months of expenses, you have a runway. You can afford to be selective about the jobs you apply for and ensure your next role is a proper fit for you. Conversely, if you’ve only got one month of cash and a large but illiquid or volatile investment portfolio, you are under immense pressure to accept the first offer that comes along. And that’s rarely going to be the best one.
Read Also: Working Adults Guide To Starting An Emergency Fund – And How Much You Should Have In It
What An Emergency Fund Actually Does
An emergency fund typically does not generate returns, and this is often used as an argument against keeping one, particularly by people who have been investing long enough to feel frustrated watching cash sit idle while markets go up. While we know that the opportunity cost is real, the purpose of the emergency fund is as a form of insurance and to buy time, specifically in an emergency. It is there to give you the opportunity you need to make thoughtful decisions about the next step of your career, whether to stay in the same industry or look into higher education, and most importantly, leave your investment portfolio alone to continue compounding.
The moment you are forced to sell part of your investment portfolio to cover living expenses, you lose that sense of control, and more often than not, you’ll be selling during a market downturn. You’re making an investment decision that is being forced upon you, and this act of “forced selling” is the exact opposite of growing your wealth. Having an emergency fund is an insurance policy against converting your long-term investments into short-term cash at the worst possible moment.
What An Investment Portfolio Actually Does
A well-constructed investment portfolio is a wealth-building engine, but it operates on a timeline that doesn’t account for short-term cash needs. Part of long-term investing is acknowledging that markets move, and portfolios will fluctuate. It is entirely normal for an ETF tracking the global stock market to go down by as much as 15% in a given quarter. This is definitely not a reason to sell if your investing timeline is measured in decades. But if you need that money to cover next month’s expenses, you cannot afford to wait for the eventual recovery. Investing is most effective when you leave it alone, reinvest dividends, and ride out volatility without panic.
This means that while a portfolio of Singapore-listed blue chips or globally diversified UCITS ETFs is relatively liquid, allowing you to sell within a day or two under normal market conditions, liquidity is not the same as accessibility. You can sell quickly, but you cannot always sell at the price you want. And selling a portion of a long-term portfolio to cover monthly expenses will erode the compounding effect that makes investing worthwhile in the first place.
Crucial Question: Can You Afford Not Having Either?
So, should you build an emergency fund or put more into investments?
This is the wrong question, because they should not be competing for the same money. They serve different roles in a financial plan, and the absence of either one creates a specific vulnerability. Without an emergency fund, your investment portfolio is at risk every time your income gets interrupted. You become a forced seller at the worst possible time, lock in losses that a patient investor would never have had to take and disrupt the very powerful compounding effect that drives wealth building.
Meanwhile, without an investment portfolio, your savings will lose value to inflation over time. A large cash buffer without any growth assets will see its real purchasing power erode slowly, creating a different kind of financial problem over the long term.
The question therefore is not just which one helps more when you lose your job. The emergency fund clearly wins that comparison in the immediate term. The real question is whether you have structured your finances so that you never have to choose between the two under pressure.
Read Also: Investing During Uncertain Times: Why Staying Disciplined Matters More Than Predicting The Market
The Real Test Of A Financial Plan
Most financial plans make sense when times are good. Investment strategies optimise returns. However, a plan that only functions when your income is stable is not a complete plan.
However, just because you need a liquid and accessible emergency fund doesn’t mean you can’t keep it somewhere safe and earn a yield on it. A high-yield bank savings account or Singapore Savings Bonds (SSBs) are just two possible options. Ultimately, your emergency fund is not there to generate investment returns, and hopefully you’ll never have to use it. Meanwhile, building wealth over the long term requires both a portfolio that grows and a cash buffer that protects it. The goal is to have both and not have to choose which matters more.
