A robust emergency fund is the most critical component for your investment portfolio, according to Suze Orman.
The personal finance guru, appearing Monday on CNBC’s “The Exchange,” said the coronavirus pandemic has laid bare the need to have money saved in the bank for unforeseen challenges. She experienced it recently in her own life, after having emergency surgery this summer to remove a tumor on her spinal cord.
“The most important thing in anybody’s personal financial portfolio — more than all the stocks and everything — is at least an eight-month emergency [fund], maybe even a year emergency fund,” Orman said.
“If you haven’t learned that after this past year of what we’ve been through, I don’t know. You have to be on another planet,” added The New York Times bestselling author.
In late March, three days after the S&P 500 hit its intraday low of the coronavirus era, Orman told CNBC that she saw a perfect buying opportunity. “There couldn’t be a better time to start investing [than] right now,” she said after the bell on March 26. “Fortunes are going to be made out of this time.”
The benchmark U.S. stock index has risen nearly 35% since its March 26 close.
While equity investors may have seen strong gains in recent months, Orman emphasized the need to be clear-eyed about the possibility of financial hardships springing up that require people to rely on their savings. It may be a health scare or the loss of a job. Indeed, the Covid-19 pandemic has brought significant economic and health challenges for millions of Americans.
The personal savings rate has climbed during the pandemic, reaching an all-time high of 33% in April. It has declined since, however, and was at about 14% in August. That is still higher than the 7.6%