21M Emergency fund

Hey guys, hope all is going well.

Making this post today because im trying to figure out what is the best move here mathematically and practically.

So to start I've been trying to avoid using bonds. A large portion of my portfolio is in VT about 60 to 65% and the other portion is in small cap value. I want to maximize returns while keeping as much diversification as possible.

The problem is because im not using bonds and want to keep high returns, i will feel the full force of any drawdowns. To combat this i had decided i wanted to have a 2-3 year cash reserve specifically for market drawdowns so i can pull from that instead of ruining my portfolio compounding.

The problem with THAT is that if its a large amount of cash not being invested then im.losing purchasing power. So then i decided to put it in SGOV.

Now im thinking at this point it just makes more sense to just have this specific 3 year emergency fund to be invested in VT. So i have my core in VT and then i have an emergency fund in VT that i will pull from only when the market is down as an emergency fund.

Would it have just been smarter to have bonds? A HYSA? Im not so sure. What do you guys think?

Addendum: I contribute 250 a month to my 2-3year savings with a 120k cap(VT), 40 a month to my 3-6 month emergency savings with a 6 to 12k cap (SGOV), and 10 a month to small purchases with no cap.