It is horrible if the volatility has a high chance of coinciding with the emergency you're preparing for.

Worried about medical emergencies? Emergency fund in equities isn't terrible. But if your emergency fund is supposed to support you after getting laid off due to an economic downturn, your emergency fund is going to be a lot smaller than it was right before the emergency. And if your emergency fund is in the stock of the same company that you work at, you're opening yourself up to just not having an emergency fund in the worst-case scenario that your company outright goes under.