Should You Invest Without Savings? TU Research

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TU research shows that the presence of emergency savings significantly changes how retail investors behave in financial markets, from asset selection to reactions under stress. In a CAWI survey of 1,214 investors, around 45% reported having a financial cushion of at least three months, while a substantial share had minimal or no reserves. Among those without savings, 52% reported panic selling during market declines, compared to 27% among financially prepared investors. Additionally, 41% of respondents without reserves had sold assets multiple times due to urgent cash needs, versus just 12% among those with a financial cushion.

Emergency savings are usually seen as a safety measure – but they may also shape how investors behave in the market.

As investing becomes more accessible, many individuals participate without sufficient financial buffers. Institutional research from the Federal Reserve (SHED) and FINRA Foundation (NFCS) consistently highlights the link between financial resilience and financial behavior. However, these studies focus primarily on access, participation, and capability – leaving a critical gap in understanding how financial preparedness affects real investment behavior under pressure.

TU Research examines whether this gap translates into measurable differences in how investors take risk and respond to market stress.

The study focuses on five key questions:

Does the presence of an emergency fund influence asset allocation?
Do financially prepared investors have longer investment horizons?
Are investors without emergency savings more likely to sell assets under financial pressure?
Is panic selling more common among investors without a financial cushion?
What do investors consider the correct first step: building savings or investing?

Findings

Based on TU proprietary research, several key patterns emerge:

Emergency savings reduce reactive behavior. Panic selling is reported by 52% of investors without reserves, compared to 27% among those with a 3+ month buffer.
Liquidity directly affects forced decisions. Investors without savings are more than three times as likely to repeatedly sell assets due to urgent financial needs (41% vs 12%).
Investment patterns differ by financial stability. Investors without a cushion show higher participation in high-volatility assets such as crypto (42%) and Forex/CFDs (27%), while those with savings are more active in ETFs (54%) and mutual funds (31%).
Time horizon expands with financial security. Only 15% of investors without reserves invest with a 3+ year horizon, compared to 31% among those with emergency savings.
Financial awareness does not always align with behavior. While 58% of respondents say savings should come first, a significant share of investors still report having limited or no emergency reserves.
Liquidity influences the ability to stay invested. Investors without financial buffers are significantly more likely to exit positions under pressure, both due to market stress and personal financial needs.

Risk warning: All investments carry risk, including potential capital loss. Economic fluctuations and market changes affect returns, and 40-50% of investors underperform benchmarks. Diversification helps but does not eliminate risks. Invest wisely and consult professional financial advisors.

Institutional validation

The Federal Reserve’s Survey of Household Economics and Decisionmaking (SHED) shows that a significant share of households remains financially vulnerable, with only about half able to cover three months of expenses using savings. This highlights a structural issue: many individuals operate without a sufficient financial buffer while still participating in financial markets.

The FINRA Foundation’s National Financial Capability Study (NFCS) reaches similar conclusions. Fewer than half of respondents report having a 3-month emergency fund, while willingness to take financial risk remains limited. At the same time, a substantial portion of individuals already hold investment products, suggesting a disconnect between financial preparedness and market participation.

The OECD shows that financial resilience – including emergency savings – is a core component of financial well-being and directly affects individuals’ ability to absorb shocks and make long-term financial decisions. Its research defines financial resilience through factors such as having a financial cushion, the ability to cope with financial shortfalls, and behaviors related to long-term planning and money management.

The Bank for International Settlements (BIS) adds a behavioral dimension, noting that households with limited liquidity are more sensitive to income shocks and market volatility, which can lead to premature liquidation of assets and suboptimal investment outcomes.

Similarly, research from the National Bureau of Economic Research (NBER) shows that liquidity constraints play a critical role in investor behavior, particularly during downturns, when financially constrained individuals are more likely to sell assets at a loss.

From a regulatory perspective, the U.S. SEC highlights the risks associated with expanding retail participation without adequate safeguards. The SEC’s Investor Advisory Committee notes that private market investments involve “complex, opaque, and illiquid” assets, requiring strong investor protections, disclosures, and diversification mechanisms, particularly given retail investors’ varying levels of financial sophistication.

Theoretical research

From a behavioral perspective, emergency savings can be seen as a stabilizing mechanism that reduces both financial and psychological pressure.

The first hypothesis is that investors without a financial cushion are more likely to treat investing as a short-term opportunity rather than a long-term strategy. Without reserves, capital allocated to markets may still be needed for everyday expenses, increasing sensitivity to volatility.

The second hypothesis is that liquidity directly affects emotional decision-making. When investors lack available cash, market drawdowns are no longer abstract losses – they become immediate financial threats. This increases the probability of panic selling and forced liquidation.

The third hypothesis concerns time horizon. Financially prepared investors are more likely to maintain longer-term positions because they are not dependent on invested capital for short-term needs. This allows them to tolerate volatility and avoid premature exits.

Finally, there is a behavioral paradox: even when investors understand that savings should come first, many still enter markets without a sufficient buffer. This suggests that accessibility and market optimism may override financial discipline.

Survey data

To evaluate how emergency savings influence real investment behavior, we conducted a proprietary quantitative study focusing on asset selection, decision-making patterns, and responses to financial stress. Unlike institutional studies, this research isolates behavioral outcomes: not just whether people invest, but how they act under pressure.

Methodology

The research was based on a structured online survey using CAWI methodology.

Sample size: 1,214 retail investors.
Geography: global.
Age: 18+.
Eligibility: respondents who made at least one self-directed investment decision in the last 12 months.
Confidence level: 95%.
Margin of error: ±2.9%.

Participants were segmented based on the size of their emergency fund, allowing comparison between financially prepared and unprepared investors.

Research team

The study was conducted by the analytical team at Traders Union:

Anastasiia Chabaniuk (Author, TU Research) – research design and interpretation.
Chinmay Soni (Fact-checker) – data validation and statistical verification.
Dan Blystone (Editor-in-Chief) – editorial and methodological supervision.
TU Research Team (Andrey Mastykin, Oleg Tkachenko) – data collection and analysis.

Note! This research is based on validated institutional findings but aims to test behavioral patterns specifically within TU’s audience.

Asset selection

To understand how financial stability affects investment choices, we analyzed asset allocation patterns.

Note: Respondents could select multiple asset classes.

Investors without emergency savings show higher exposure to high-volatility instruments, with crypto leading (42%) and Forex/CFDs also relatively common (27%). At the same time, their participation in diversified assets remains lower, with ETFs at 29% and mutual funds at just 18%.

In contrast, investors with a financial cushion demonstrate a more balanced allocation. ETFs lead (54%), followed by stocks (49%) and mutual funds (31%), while exposure to higher-risk assets declines, with crypto at 28% and Forex/CFDs at 15%.

Insight: Financial stability is associated with a shift from speculative assets toward more diversified and structured portfolios.

Investment horizon

To measure long-term versus short-term behavior, we analyzed declared investment horizons.

Among investors without a reserve, only 15% report a horizon of 3+ years, while 34% focus on periods shorter than 6 months.

For investors with emergency savings, the pattern reverses: 31% invest with a 3+ year horizon, and only 14% operate in short-term timeframes.

Insight: Emergency savings significantly extend investment horizon, enabling investors to remain in the market during volatility driven by geopolitical and macroeconomic factors.

Forced selling behavior

To assess the impact of liquidity constraints, we examined whether investors had to sell assets due to urgent financial needs.

Forced selling behavior
Behavior	No savings (0–2 months)	With savings (3+ months)
Sold multiple times (due to cash need)	41%	12%
Sold once	28%	19%
Never sold under pressure	31%	69%

Among respondents without savings, 41% reported selling assets multiple times due to lack of cash, and only 31% had never experienced such situations.

Among financially prepared investors, 69% reported never selling under pressure, while only 12% faced repeated forced sales.

Insight: Liquidity constraints are one of the strongest drivers of suboptimal investment decisions.

Panic selling

To evaluate emotional reactions to market downturns, we analyzed panic selling behavior.

More than half of investors without an emergency fund (52%) reported selling assets during market declines due to fear or financial pressure. Among those with savings, this figure drops to 27%.

Insight: Financial buffers reduce emotional reactivity and improve decision stability during market stress.

Financial priorities

To understand investor mindset, we asked respondents what should come first: saving or investing:

58% said building emergency savings should come first.
27% supported a balanced approach (saving and investing simultaneously).
15% believed investing should start immediately.

Insight: There is a clear gap between financial awareness and actual behavior, as many investors act before achieving financial stability.

Download the full PDF version of the TU research to access additional analysis, detailed survey data, and extended findings from our analytical team. The report includes complete methodology, charts, and behavioral insights referenced throughout the study.

Download PDF version

Practical implications for retail investors

In an environment where investing is increasingly accessible, financial readiness becomes the key differentiator between disciplined strategy and reactive behavior.

Separate investment capital from essential funds. Investors without liquidity reserves are more than three times as likely to face repeated forced selling, turning volatility into realized losses.
Build a minimum financial buffer before increasing risk. Even a 1–3 month reserve significantly reduces panic-driven behavior, which affects over half of financially unprepared investors.
Adjust asset allocation to your liquidity level. Limited reserves are linked to higher exposure to volatile assets, while financial stability enables a shift toward diversified instruments like ETFs and funds.
Treat diversification as a function of financial readiness. More balanced portfolios typically emerge after liquidity stability is achieved, not before.
Avoid impulsive decisions under pressure. A large share of investors act during stress – introducing even a short delay between idea and execution can improve outcomes.
Prioritize staying invested over entering the market. Long-term results depend less on timing entry and more on the ability to hold positions without being forced to exit.

Instead of relying on frequent trading decisions – which are often affected by financial pressure – some investors opt for structured or semi-passive approaches, such as copy trading, managed accounts, or portfolio-based strategies. These models can help reduce impulsive decision-making and improve consistency, especially for those still building financial stability.

At the same time, the effectiveness of such approaches depends heavily on the broker’s infrastructure, including execution quality, risk controls, transparency, and access to diversified instruments.

Below is a comparison of the best Forex brokers that support both active and semi-passive investment strategies, including copy trading, PAMM accounts, and managed portfolio solutions:

Best Forex brokers for structured and semi-passive investing
	OANDA	FOREX.com	IG Markets	Blackbird	XPro Markets
Min. deposit, $		100	1	1	250
Copy trading
PAMM
Managed
Deposit fee, %
Withdrawal fee, %					0-1.5
Negative balance protection
Investor protection	£85,000 SGD 75,000 $500,000	£85,000	£85,000 €100,000 SGD 75,000	€100,000 (ES)	€20,000
Open an account	Go to broker Your capital is at risk.	Study review	Study review	Study review	Study review

Data sources and methodology references

Federal Reserve (2025). Economic Well-Being of U.S. Households (SHED)
Federal Reserve (2025). Economic Well-Being of U.S. Households in 2024 – Savings and Investments
FINRA Investor Education Foundation (2024–2025). National Financial Capability Study (NFCS)
OECD (2020). OECD/INFE International Survey of Adult Financial Literacy
Bank for International Settlements (BIS, 2022). Household liquidity and financial stability
European Central Bank (2025). Financial Stability Review
National Bureau of Economic Research (NBER, 2022). Liquidity Constraints and Asset Sales in Downturns
U.S. Securities and Exchange Commission (SEC, 2025). Investor Advisory Committee Report on Retail Access and Investor Protection
World Bank (2019-2020). Global Financial Development Report
IdSurvey. CAWI Methodology Overview

Previous volumes in this series

Conclusion

The research clearly demonstrates that having an emergency fund is not just a financial safety net—it fundamentally shapes investment behavior and resilience. Investors without a financial cushion are up to three times more likely to panic sell or liquidate assets under pressure, making them vulnerable to market downturns and short-term decisions. In contrast, those with savings gravitate toward diversified portfolios and are better able to hold their investments through volatility, maximizing long-term gains. If you’re considering investing, prioritize building a financial buffer first; it’s the foundation for strategic, disciplined participation in the markets. Ultimately, your liquidity isn’t just about surviving a rainy day—it’s about empowering you to invest with clarity, confidence, and endurance.

FAQs

How does lacking emergency savings affect investment decisions during periods of market stress?

According to the research, investors without emergency savings are more likely to engage in reactive behaviors such as panic selling during downturns. 52% of these investors reported selling assets during market declines, compared to 27% among those with a financial cushion. Lack of liquidity can make market volatility feel like a direct financial threat, leading to more emotional and potentially suboptimal decisions.

What differences in asset selection are observed between investors with and without emergency funds?

Investors without emergency savings tend to favor high-volatility assets like cryptocurrencies and Forex/CFDs, while those with financial buffers allocate more to diversified instruments such as ETFs and mutual funds. This suggests that financial stability is linked to more balanced and structured portfolio choices.

In what ways does having an emergency fund influence an investor’s time horizon?

The presence of an emergency fund is associated with longer investment horizons. Only 15% of investors without reserves invest with a horizon of more than three years, compared to 31% among those with savings. Financial security reduces the need to access invested capital quickly, enabling investors to tolerate short-term fluctuations and maintain positions for longer periods.

Why do many investors begin investing before establishing adequate emergency savings?

Despite 58% of respondents stating that building emergency savings should come first, a significant portion invest without sufficient reserves. The research suggests this may result from increased accessibility to investment platforms and optimism about market opportunities, which can override financial discipline, creating a gap between financial awareness and actual behavior.

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Team that worked on the article

Anastasiia has 17 years of experience in finance and content marketing. She believes that the support of information and expert opinion is very important for the success of investors and new traders.

Learn about our editorial policies

Dan Blystone began his trading career in 1998 as an arbitrage clerk on the floor of the Chicago Mercantile Exchange (CME). He later traded bond and Eurex futures at proprietary firms such as Altea Trading, gaining valuable experience in high-frequency trading and risk management.

Chinmay Soni is a financial analyst with more than 5 years of experience in working with stocks, Forex, derivatives, and other assets. As a founder of a boutique research firm and an active researcher, he covers various industries and fields, providing insights backed by statistical data.

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