Fidelity’s core money market fund positions – which ones do we hold & why? How do you change your core money market fund position (step-by-step)? What other money market fund options might you want to consider?
That’s what we’ll be covering in today’s video, including SPAXX, FZFXX & FDRXX vs FCASH & Fidelity’s FDIC-Insured Deposit Sweep Program & a brief overview of the municipal money market funds they offer.
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Fidelity Core Money Market Funds | SPAXX, FZFXX & FDRXX vs FCASH | How To Change Core Position
As an investor looking to park your cash in a safe and low-risk investment option, Fidelity Core Money Market Funds might be just what you need. With several different funds available, each with its own set of features and benefits, it’s important to compare and understand the differences between them to make an informed decision.
Fidelity offers three primary Core Money Market Funds: SPAXX, FZFXX, and FDRXX. These funds are designed to provide investors with a stable investment option that has the potential to earn competitive yields. They invest in high-quality, short-term money market instruments, such as U.S. Treasury securities, commercial paper, and certificates of deposit, aiming to preserve principal and provide liquidity.
Let’s take a closer look at each of these funds:
1. SPAXX (Fidelity Government Money Market Fund): SPAXX focuses on investing in U.S. government securities and aims to provide investors with a higher level of stability. It is a great choice for conservative investors who seek minimal risk.
2. FZFXX (Fidelity Treasury Money Market Fund): FZFXX invests primarily in U.S. Treasury bills, notes, and bonds, making it an ultra-safe investment option. It is suitable for investors looking for minimal credit risk.
3. FDRXX (Fidelity Government Cash Reserves): FDRXX invests in U.S. government obligations, including securities issued or guaranteed by federal agencies and instrumentalities. It aims to maintain a stable $1 net asset value (NAV) and generate income consistent with the preservation of capital.
While SPAXX, FZFXX, and FDRXX are closely related, the variations in the types of securities they invest in differentiate them to some extent. It’s important to assess your risk tolerance and investment objectives before choosing among these funds.
These Fidelity Core Money Market Funds are often used as “core positions” in investor accounts, serving as a place to park cash temporarily or as a cash allocation within a diversified portfolio. They offer daily liquidity, which means you can easily access your funds when needed.
If you decide to change your core position within Fidelity, whether it be from one Core Money Market Fund to another or to switch to another investment option like FCASH, the process is relatively straightforward:
1. Log in to your Fidelity account: Access your Fidelity account through their website or mobile app using your login credentials.
2. Navigate to the “Accounts” section: Look for the section that displays your investment accounts.
3. Select the relevant account: Choose the account in which you want to change your core position.
4. Explore investment options: Within the account, find the section that allows you to invest or trade in different funds.
5. Choose the desired fund: If you want to switch to FCASH, search for it among Fidelity’s available investment options and select it. If you prefer to switch between the Core Money Market Funds, choose the desired fund accordingly.
6. Confirm the transaction: Follow the prompts to confirm your investment transaction. Be aware of any fees or restrictions that may apply.
Remember, it’s always wise to consult with a financial advisor or conduct thorough research before making any investment decisions. Everyone’s financial situation and risk tolerance are unique, so what works for one individual may not necessarily be the best option for another.
In conclusion, Fidelity Core Money Market Funds offer investors a stable and low-risk option for cash allocation. Whether you choose SPAXX, FZFXX, FDRXX, or even FCASH, understanding your investment objectives and assessing the differences between these funds will help you make an informed decision.
Jennifer, thank you for sharing your knowledge – especially for small investors like me!
What I didn’t like on these is that the money is not immediately available if you need. Had to sell FDRXX, for example, and it takes days before you a can actually withdraw the money.
Yes please.. more info on Munis
Long Explanation of Fidelity Cash Management. Folks, I've spent most of today trying to figure out how to set up Fidelity accounts to maximize interest earned from treasury money market accounts in a high tax state, while also utilizing all of the banking features that fidelity makes available (debit card, checks, online bill pay, ach transfers, direct deposit). I'm still in the process of funding my new accounts, so I have not yet implemented this strategy, but I think it will work.
First of all, there are two different Fidelity accounts that need to be opened: (1) a Fidelity cash management account, and (2) a Fidelity brokerage account.
Cash Management Account. You cannot designate an alternative funding account for Cash Management – the only funding option is a bank account which pays a 2.6% interest rate and the funds are FDIC insured. The cash management account really works just like a good bank account with a debit card, online bill pay, check writing, ach transfers, direct deposit, etd. I believe you could directly purchase Fidelity money market shares in the cash management account, but it is not made for investments. It's really just a bank account.
Brokerage Account. The brokerage account is made for investments, but they also have some cash management features like check writing. In a taxable brokerage account you can designate SPAXX or FZFXX (two very similar funds) as alternatives to the FDIC bank funding account. However, you cannot designate FDLXX (which is the treasury only money market account) as an alternative funding account. As I discuss in a minute, I suspect that they precluded FDLXX from being an alternative funding account because they are holding mostly actual treasuries in that account rather than swaps and they are worried about too many people making too many transactions in the account and causing them management difficulties. Swaps are generally shorter term and easier for them to convert to cash. But there are real advantages to those of us in a high tax state to using FDLXX over the settlement fund options.
FDLXX: The 7 day yield is currently 4.82%, which is actually higher than the settlement funds (about 4.75%), but most importantly the settlement funds are holding about 85% of their assets in swaps or agency bills which are not exempt from state taxes, while FDLXX is holding 79.71% in actual treasuries which are exempt from state taxes. Also, in states like California and New York, I believe you will get no tax state tax exemption if the fund has less than 50% treasuries, so if the holdings remain for the full year as they are currently, no interest earned on the settlement funds will be exempt from state taxes in a 50% state. While nearly 80% of the interest earned in FDLXX would be exempt from state taxes. So FDLXX is a lot better in any taxable state (higher yield currently and much higher state deductibility). But it's trickier to utilize because it cannot be made a default funding source.
The Cash Manager. Don't confuse the cash manager with a cash management account. The cash manager is a feature in a cash management account that can enable you to utilize FDLXX as your primary funding source, although it requires some setup and monitoring. It has three important features: (1) it will give you notice when your cash management funding account is below the amount you set, (2) it will give you notice when your cash management funding account is above the amount you set, and (3) it will allow you to use FDLXX in your brokerage account as a free overdraft source for your cash management account. So let's say you set the cash manager to notify you whenever you have more than $5 in your cash management account. When you get the notice (from direct deposits, check deposits from your cellphone, ACH transfers, whatever) that there is more than $5 in the cash management account, you'll go in and transfer all of the money from the cash management account to FDLXX. When you spend money, you have this automatic self overdraft protection enabled to charge FDLXX for whenever you spend . It will pull whatever you spend from FDLXX to prevent an overdraft. So you basically keep nothing in the cash management account, use the self overdraft protection to cover spending, and the only part that's not automatic is that you have to physically move incoming money to FDLXX. So it sounds pretty good to me – if it works as advertised. There may be a way to push money directly into FDLXX in your brokerage account, but it's not apparent. If not, you'll have to transfer manually when you get notice that incoming funds are in the cash management account.
So that's the scoop. If you're in a low tax state and want to use one of the available money market funds as the default funding source for your brokerage account, your transfers into the brokerage account would not have to be transferred manually. But transfers into your cash management account still would have to be manually transferred since they cannot be default funding sources.
If anyone has any better solutions, please chime in. I'm new to using Fidelity for money management, but it seems like a really good solution in relation to very low yielding and fully-state-taxable bank accounts. And Fidelity allows living trust accounts and other account types that are very difficult to set up at most of the higher-paying online banks.
You missed the best one, FMPXX. Currently paying over 5%.
5:58 Great helpful information. Thanks!
Do Vanguard next
Hi,
Does Schwab or vanguard has same money market account that you can park your money and get interest?
Ma'am. Thank you very much. This is a great lesson for cash management.
or just use "PT" and "ET".
Would appreciate if we can get more info on Municipal Money Market Funds and when it may make sense to put money into that
Yes. Please info for vanguard please.
I have a Fidelity account that I do my bill paying out of, it's kind of a bucket thing I do to manage by spending transferring a fixed amount out of my main brokerage account on a monthly basis (I'm retired). I tried changing the core account for this account but the only option it shows is one of those crappy FDIC option. What gives?
If you use a money market fund as your core position rather than the bank account option at Fidelity, do you still have all the same cash management features? Do you have an account with an account number and routing number to make pulls? Can you use bill pay from your money market account? If so, that would be pretty impressive. In comparison, Vanguard's money market funds pay a little higher interest rate, but you cannot use the Treasury MM fund as your sweep account (and the treasury MM account has been holding a lot of state-taxable swaps rather than pure treasuries), Vanguard only allows checks over $500, they have no bill pay, no debit card, and no account and routing number for pulls from creditors. So Vanguard's cash management options are not great. I'm not clear whether Fidelity solves all of these problems or not if you use a money market fund instead of a bank account as primary. Does anyone know the answer?
Do a money market review of Ameritrade
Great video. One question: when interest rates begin to drop next year (hopefully) will the value of the treasuries go down like bonds?
Thank you for all your very informative videos. For this Fidelity Core MM Fund video, could you clarify the tax exemption on the Fidelity SPAXX portfolio? I see that in my account as of 7/19/23, it's portfolio has 64.54% of the portfolio in U.S. Government Repurchase Agreements (these are not exempt from federal and state income taxes), and only 3.29% of the portfolio in U.S. Treasury Bills (are exempt from federal and state income taxes).
Can you comment on FDLXX? With all of its dividends be exempt from state income tax, since it is based on US treasuries?
SPAXX is not state tax exempt in CA!
Great video!
Yes please for Vanguard. I LOVE ALL OF YOUR VIDEOS! HUGE FAN!
Someone please tell me how to get to the screen on Fidelity that shows FCASH, SPAXX, and FZFXX rates (i.e. 2.57%, 4.74% and 4.74%)
These money market funds all hold about 30% in US government securities, so about 70% of the fund returns are taxable. Note that in California, Connecticut, and New York these funds do not hold enough government securities to be tax exempt. So in those states 100% of the fund returns are subject to state and local taxes.
I would like similar info for Schwab money market accounts.
Does Merrill lynch have one?
SPAXX fell by .01 from 4.75 so that why it 4.74% apy now
Oops, you didn't mention if Fidelity has opted to impose 'gates' on these MM withdrawals. Schwab has chosen NOT to do so, Vanguard DOES have a gate in event of 'trouble'. It is possible that, given the assets now held in MM funds, the SEC is going to insist all of them impose gates but for now it is the Custodian that decides.
WOW! Thank you so much! I too was stuck on the bank sweep in my 401k from a decision a long time ago. I've been enjoying lots of your videos lately, thank you!
Please do a similar video on Schwab and Vanguard. I have my IRAs and other accounts in both, and was thinking of moving accounts from Vanguard to Fidelity due to changes at Vanguard.
Love the detail, but what about Vanguard? I am moving funds from a bank saving account to my Vanguard taxable brokerage account and want to place that in Vanguard’s money market funds. Details please?
I have Fidelity FZDXX Premium Money Market and the rate has been holding at 4.94 for several weeks.
Having spoken to my financial advisor, then I reconfirmed, the money market funds, FDRXX, SPAXX are not covered by FDIC. As such I'm sticking to Fcash and the FDIC insured (within ROTH)
According to the fund overview. Below is the risk statement, it essentially spells out that there could be a MM run and its not like cash.
You could lose money by investing in the fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Yes vanguard
I am a bit confused. I don’t think Spaxx is state and local tax exempt? Is there one that is? Fdrxx? At first I was excited to hear that in the video but then tried to check and I don’t think that is accurate. In any case, I changed from f cash to spaxx for my taxable brokerage account. I would love to get this right…. Maybe a follow up fidelity video would be great too. Just knowing the difference between f cash and spaxx is great. I need more,lol!
Fdrxx requires $100,000 to open this account. But, dirty little secret, once opened, you may allow the account to fall below the $100,000 limit. But confirm this last point with your fidelity representative.
As a long-time Fidelity customer, I can tell you that if you have SPAXX as your core account and let's say you also have some money in another money market fund within the same account and you make a trade but don't have the funds in SPAXX to cover the purchase, they will take it from the other fund. It all shows up as funds available to trade.