SPAXX vs. FDRXX, FZFXX, FDIC, FCASH - Fidelity Core Position (2024)
Understanding Core Positions in Fidelity Investment Accounts
Overview of Core Position Options
- Fidelity investment accounts offer several options for a "core position" for cash, including SPAXX, FDIC, FCASH, FDRXX, and FZFXX.
- The yields for these options fluctuate frequently; viewers are encouraged to verify current rates independently.
- A core position is where uninvested cash resides within the account and acts as a wallet for transactions like buying stocks or processing payments.
Importance of Cash Management
- Holding excessive cash is generally discouraged; market timing can be detrimental to investment performance.
- T-bills and short-term government bonds are considered "cash equivalents," but the discussed funds do not serve as dedicated T-bill investments.
Navigating Fidelity Account Settings
- To change your core position in Fidelity, navigate to the Positions tab and select Cash position.
Comparing Different Core Position Options
SPAXX: Fidelity Government Money Market Fund
- SPAXX is a money market fund that invests in ultra-short-term instruments like CDs and commercial paper to provide interest.
- It is collateralized by government securities, making it safer than broader money market funds that include corporate debt.
- At the time of recording, SPAXX had a 7-day SEC yield of 5.00%, with expected volatility around 3%.
FDIC Insured Deposit Sweep Program
- This program sweeps cash into an FDIC-insured vehicle across multiple banks, ensuring coverage even above $250,000.
- It functions similarly to a traditional savings account but typically offers lower yields compared to other options on this list (2.69% at recording).
FCASH: Default Option in Taxable Brokerage Accounts
- FCASH represents a free credit balance from Fidelity that earns interest; its rate was also noted at 2.69%.
Exploring Other Money Market Funds
FDRXX: Fidelity Government Cash Reserves Fund
- FDRXX operates similarly to SPAXX but is considered an older version with nearly identical holdings and yields (5.02% at recording).
Treasury Money Market Fund Overview
Key Features of Treasury Money Market Fund
- The Treasury Money Market Fund is similar to SPAXX and FDRXX but exclusively invests in U.S. Treasury securities, lacking the 10% allocation to agency securities.
- This fund is considered slightly more tax-efficient, making it a viable option for taxable brokerage accounts with Fidelity.
- Currently, the yield for this fund matches that of SPAXX at 5.00%.
Choosing Your Fidelity Core Position
Considerations for Cash Management
- When selecting a core position at Fidelity, consider your risk tolerance; opting for an FDIC-insured cash sweep program offers zero volatility and virtually no risk.
- For those seeking a safe place to park cash with expected positive nominal returns, a government money market fund is recommended.
- It's important to note that money market funds are SIPC-insured up to $500,000.
Comparing Money Market Funds
Strategies for Maximizing Returns
- Most money market funds listed are nearly identical; therefore, aiming for the highest yield is advisable when choosing among them.
- Investors can switch between different funds based on which one offers the best return at any given time.
- The decision ultimately involves comparing money market funds against the FDIC program.
Support and Resources from Fidelity
Assistance Options Available
- If managing these options feels overwhelming, investors can contact a Fidelity representative at 800-544-6666 for assistance.
- Interest earned from government securities in these funds will be state-tax-exempt.