The first phase of building a portfolio is creating your emergency fund and food storage. While this series will not cover the process of building your food storage, please be aware of its importance.

The main objectives of your emergency fund should be liquidity, safety, and the preservation of principal. The first assets you add to your portfolio should be low-cost, high-liquidity money-market mutual funds or other savings vehicles, such as savings accounts, money-market deposit accounts, short-term Treasury bills, or CDs (see Section 5: Cash Management on this website for ideas of other assets that could be included in your emergency fund). Ideal assets for your emergency fund will allow for adequate liquidity in case of an emergency while still giving you a positive return (or as close to a positive return as possible) after inflation and taxes. Your rate of return on this fund should ideally be greater than inflation and taxes combined. The goal for this phase is to accumulate three to six months of income in your emergency fund before you begin investing in any other phase. If you are worried about your job security, or if you have a volatile income stream, you may want to maintain a higher percentage of your income in this fund.