Yes, regarding this, I think your assumption could be right or wrong, especially regarding using reserve funds to invest in Bitcoin. In my opinion, using reserve funds to invest in Bitcoin is certainly possible. Basically, reserve funds are allocated for planned expenses, such as home renovations and other planned expenses. So, essentially, reserve funds are somewhat flexible. So, perhaps that's why you said you could use reserve funds to invest in Bitcoin. However, I'm still not very confident about using reserve funds to invest in Bitcoin. While it's true that reserve funds are quite flexible and aren't used for emergencies, I personally feel more comfortable investing using only discretionary funds. Because discretionary funds are funds that will not be used for any other purpose.
I don’t think he’s suggesting investing in bitcoin with your reserve funds but rather in some cases that an investor might feel there’s an opportunity to buy he can use money from the reserve fund to buy and later he can try to balance his funds when he receives his income. Reserve funds can be used for such things cause they’re backup funds, which keeps you from going into debt, they’re not restricted as emergency funds which are designed for specific kind of unexpected expenses like job loss, medical bills etc.
There are situations one can find himself in and you’ll see that taking money from reserve to invest isn’t such a bad idea so long as there’s a plan to replace it. Assuming there’s a dip and you have no discretionary available but you have some reserves and emergency funds available, one can decide that instead of waiting for when the income comes to be able to get discretionary he can use his reserve and replace it after, in order not to miss that buy opportunity.
Disclaimer!: The best way of investing is using your Discretionary money, but if you’re willing and able making use of reserve fund occasionally to increase your accumulation not such a bad idea.
The important thing in this case is to separate the role of either type of fund. Emergency funds must not be touched, that is a survival fund. The reserve funds on the other hand are more of a cushion to the planned yet non urgent expenses hence flexible. I have watched people effectively use reserves to dip, and then replenish it on the following paycheck. The risk is that you forget to replenish it and an budgeted expense just appears. Yes it can work, but only when you are disciplined enough to think of it as a temporary loan to yourself.
Well said Mate. And to further buttress your point, Emergency funds are 100% non negotiable. It sits untouched because the role of the emergency fund is survival, offering you/your investment protection from unforseen circumstances that may have required you to tap into your investment, like losing your job, medical emergencies car repairs, and/or any form of emergency that occurs in a sudden. And the moment folks begins to look at it as available for other purposes asides actual emergencies, it potentially losses it's purpose.
Reserve funds on the other hand, serves as a kind of flexible buffer for some kinda semi predicable but yet non urgent expenses. It could be insurance premiums, minor home repairs, annual subscription and sometimes unexpected bills. These financial needs are not actual emergencies but they don't neatly fit in a monthly budget either.
Now, you point about using reserves as a short term dip fund could actually work, but I'll give a few valid points to kinda strengthen the argument more.
1. Discipline is Key: if you wanna consider the reserve funds as a personal resolving credit, then you'll have to remember to constantly replenish it or commit yourself to topping it quickly. The danger doesn't only lie in forgetting to top up the reserve fund but also making it a normal routine to always dip into it too often.
2. Opportunity Cost: Some folks could sometimes attempt putting their reserve in a high yield savings account, where they often get the chance to receive though small but steady returns. So when folks normalize constantly dipping into the reserve and refilling, it'll potentially prevent that growth.
3. Stress buffer: A solid reserve fund helps to mitigate the chances and likelihood of false emergencies, which are things that actually appear to be emergencies but are not really actual emergencies. Some folks tap into their Emergency funds for expenses that are actually predictable but unplanned in the budget, just like car maintenance. It is the job of a solid reserve fund to take care of things like this, while completely keeping the emergency fund untouched, but imagine a situation where you've just recently tapped into your reserve fund but yet to replenish it and then such predictable expenses pop up from the Blues, the emergency fund becomes the only option, which isn't completely right
There several more reasons but I'll just stop here.