1. There is value to have an emergency fund earmarked and tagged as a rainy day fund that is separate from anything else. However, a lot of people will use their ROTH IRA as an emergency fund because you can withdraw contributions tax/penalty free. So if/when your ROTH is large enough, it can double as a emergency fund. i can understand why folks don't do this, and to be honest I don't do it right now either but I'm leaning more and more in that direction. Depending on how you have your accounts set up, in the case of a very unexpected emergency you could use savings account, credit cards, and then pull from the ROTH as necessary. If it is job loss, then maybe that won't work. A lot has to deal with how much runway you have before a known emergency.

2. I'd put this is a simple S&P 500 index fund. Something like VTSAX that has an expense ration of .04%. Vanguard has great index fund choices and they have great expense ratios.