Past a certain savings threshold, there's no need to keep your emergency fund / home savings out of the stock market

Contentious statement I know but hear me out.

Say you want to maintain a $20,000 emergency fund and a $100,000 reserve for a down payment on a home in a year or two. The conventional advice is to put this in a high yield savings account or some similar financial instrument. However, over a certain threshold of savings, this isn't necessary anymore. On average you will be losing out of potential gains from the market, and even if there was a catastrophic crash, provided you held a diversified portfolio, you likely aren't going to lose your entire portfolio. Depending on your risk tolerence, I think after your portfolio is past a certain threshold (800k, 1mil, 2mil, etc.) it's reasonable to no longer place a big emphasis on cash accounts.

Let's consider the worst case scenario and say the entire market drops by 60-70%. Of course psychologically it would feel terrible to say, lose the majority of your portfolio in a crash and then immediately withdraw the remainder to purchase a home, but that's a sunk cost fallacy. Withdrawing $100k during a bull or bear market has no bearing on your future portfolio performance, it's just psychologically we feel better doing so when markets are doing well.