Investing / Should I go SPAXX, FZFXX, or FCASH?
Nov 15, 2020
Should I go SPAXX, FZFXX, or FCASH?
Opening an account at Fidelity but not sure which account is best?
Replies (15)
Nov 15, 2020
What's your goal for this account? Are you prioritizing preserving your capital for most of your $$ in the account or only looking at these funds for left over cash in your account?
Nov 15, 2020
I agree with @Julie186 that it would be great to know what your goals are first + any other information that will help us help you! But on the face of it, here are my thoughts:
- SPAXX and FZFXX are expensive money market accounts in my mind. The expense ratio or annual cost to be invested in those funds is on par with the long-term investment return, which may be an issue. See the quick comparison of both funds here
- FCASH is known as a free credit balance. You won't be paying expenses on FCASH, so perhaps that may be a better option if you're evaluating one of these funds for your idle cash in the account (and assuming you plan to have very little idle cash in the account!). Interest paid currently looks to be 0.1% (not bad), but that may change.
Nov 16, 2020
@Ckim005, charging 0.42% for SPAXX and 0.29% for FZFXX, which are supposedly cash equivalents, is ridiculously high IMHO
Nov 16, 2020
I'd also add that income from different types of money market funds (MMF) are treated differently for tax purposes. For example, dividends from government MMFs are completely or partially exempt from state income taxes, and dividends from state municipal money market funds are exempt from state and federal income taxes. So, if you plan to keep most of your cash in one of these funds and therefore generating dividends, look into the potential tax benefit & impact.
Aug 05, 2021
@Ckim005 I've switched from FCASH to FZFXX and back *twice* now! But I've figured out the REAL difference between these (as of now, Aug. 5, 2021). (The following is not investment advice, for entertainment purposes only.)
Right now, FCASH, SPAXX and FZFXX all have a .01% yield. SPAXX and FZFXX have expense ratios (ER) of .42%, while FCASH has *no* ER. Why would anyone pay a .42% ER on a .01% yield? The answer is SIPC (Securities Investor Protection Corporation) coverage!
According to Fidelity's site, SIPC covers up to $500k for stocks, bonds and other securities, *with up to $250k of that covering cash and cash equivalents,* which means FCASH. This means SIPC covers you up to $250k in FCASH, but if you have $250k-$500k in the core position of your taxable Fidelity account, that .42% ER in SPAXX and FZFXX, which are money markets i.e. securities, is justified by the extra SIPC coverage.
So for now I'm sticking with FCASH, though it will be worthwhile to monitor the yields for when they are above .42%, justifying a move to SPAXX, FZFXX, or some other money market.
Aug 06, 2021
@Art392 A helpful distinction to know, thanks for sharing it!
I think you're right to stay in FCASH for now (I am as well) since I'm not quite sure how often money market funds default or better put, "break the buck" but suppose there is always some very very small chance or risk of it. 0.42% just seems like a lot for the coverage.
Another thing I found out is that if you have a Fidelity Cash Management Account (CMA) linked to your brokerage account, any idle cash in your brokerage gets swept into the CMA and those deposits or balances are FDIC insured (up to $250K per depositor). Interest on "sweep" balances here is also 0.01% (see here. The only thing I can't figure out is if there is a monthly fee for the Fidelity CMA account... I don't think so, but not 100% sure there.
Aug 13, 2021
@Ckim005 Thank you for that comprehensive comparison that i couldn't find anywhere else, including the fidelity website.
Aug 09, 2021
@Ckim005 Supposedly no monthly fee, no minimum deposit required, unlimited ATM refunds, but I think they do charge some nominal amount for wires, stop payments, returned items ($10-15) for their CMA account. It's not supposed to be used as your main bank account but more for short term cash management. If you have more $$ than the SIPC coverage allows, you can get FDIC up to $250K. And in exchange for that coverage, you'll get a measly interest rate. I guess measly beats nothing!
Aug 24, 2021
@Ckim005 There is no fee on those funds when those funds are used to hold cash within an account. Those fees only apply if you own the funds separately as an investment, FYI.
Aug 24, 2021
@T796 I see nothing on the Fidelity site saying this. Where do you get this esoteric information? https://www.fidelity.com/trading/faqs-about-account#faq_about2
Aug 25, 2021
@T796 Have had Fidelity accounts since 1985. Talked to 2 different agents today about a couple of IRA changes I was making, and double checked that there was no Fidelity fee attached to the Core account when it uses SPAXX or several others. SPAXX charges about 0.4% if you own it separately, but they waive the fee for Core/IRA holders.
Aug 25, 2021
@Ckim005 You are correct that there are no fees for the Core account inside an IRA. FCASH does not appear to be a current option, far as I can tell, at least inside an IRA, which is what I have.
Sep 07, 2021
@Patty930 Thanks Patty for sharing what you learned when you spoke to Fidelity reps.
I finally got around to talking to them too and this is what I gathered:
- Whether it's a "core position" or not, these money market funds operate the same way
- The 7-day yield (or interest) is 0.01% but that's net of the expense ratios (i.e., operating expenses taking out of the fund itself and not from our accounts directly) and so that's why that yield is so low.
- So my understanding is that there is no "waiving" of fees - personally, I think that would be hugely problematic for them to do that let alone track all of that given everyone who trades into a money market fund is a Fidelity account holder. Just look at the 7-day yield as the net amount you get for holding your idle cash in the money market account.
Nov 15, 2020
Since these look like cash alternatives, have you looked at iShares high-yield cash (ICSH)? That could be a viable option. The expense ratio is 0.08%. I'm considering this myself not just for idle cash but more - maybe 20%+ of my money in case I need to move to a cash-like investment.
Nov 16, 2020
I think Fidelity requires that you choose one of these funds for cash when you open an account. So, if you choose one of them and change your mind, you can always switch.