SPAXX vs. FDRXX, FZFXX, FDIC, FCASH - Fidelity Core Position (2024)

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.
Video description

If you’ve got a Fidelity investment account, you’ve probably encountered several options for your “core position” for cash: SPAXX, FDIC, FDRXX, and/or FZFXX. Is there a best option? I compare them here for 2024. // TIMESTAMPS: 00:00 - Intro 00:31 - What Is the Fidelity Core Position? 02:10 - SPAXX - Fidelity Government Money Market Fund 03:02 - SPRXX - Fidelity Money Market Fund 03:17 - SIPC Insurance 03:38 - FDIC Program 05:00 - FCASH 05:14 - FDRXX - Fidelity Government Cash Reserves 05:37 - FZFXX - Fidelity Treasury Money Market Fund 06:07 - Conclusion & Outro // SUMMARY: Your "core position" at Fidelity refers to where your uninvested cash goes. SPAXX is a money market fund. This is a fund that holds ultra-short-term instruments that are considered cash equivalents. SPAXX is specifically collateralized by government securities, and would thus be considered safer than a broader money market fund that includes corporate debt. SPAXX has an SEC yield of 5.00%. You may see SPRXX instead of SPAXX. They're very similar and should have the same fee, but SPRXX is slightly broader in its scope of debt instruments, so SPRXX may pay a higher yield than SPAXX. SPAXX and all the money market funds are insured by the SIPC. FDIC is simply an FDIC-insured vehicle into which cash is "swept" inside the account. FDIC stands for Federal Deposit Insurance Corporation, which is quite literally the organization that insures your cash deposits up to $250,000. This is basically a true savings account like you'd have at your regular bank. As of January 2024, this FDIC cash sweep program has an interest rate of 2.69% and a fee of 0.01%. In the event of a lack of capacity or availability from program banks, any excess cash will be swept into the Fidelity Government Money Market Class S mutual fund, for which the ticker is FZSXX. Fidelity refers to this as the "Money Market Overflow." FCASH is a free credit balance from Fidelity that earns interest. At the time of this video, its interest rate is 2.69%. Like SPAXX, FDRXX is a U.S. government money market fund. For all intents and purposes, it is basically an older version of SPAXX. FDRXX has an SEC yield of 5.02%. You may encounter FZFXX in your taxable account. It's the Fidelity Treasury Money Market Fund. It's basically the same as SPAXX and FDRXX except it does not have the 10% or so in agency securities. This one is entirely U.S. Treasury securities. Right now FDRXX is exactly the same as SPAXX at 5.00%. Don't overthink your Fidelity Core Position. You can change your core position at any time online yourself, or you can also call a Fidelity representative to do it for you at 800-544-6666. Read the blog post here: https://www.optimizedportfolio.com/fidelity-core-position/ #fidelity #fidelityinvestments #moneymarketfund // INVEST ► M1 Finance: https://optimizedportfolio.com/go/m1 ► My comprehensive review of M1 Finance: https://www.optimizedportfolio.com/m1-finance-review/ ► Get my dividend portfolio: https://www.optimizedportfolio.com/m1-finance-dividend-pie/ ► Lazy Portfolios: https://www.optimizedportfolio.com/lazy-portfolios/ ► Beginners’ reference guide (updated regularly): https://www.optimizedportfolio.com/beginners-start-here/ ► Webull (for stock traders; get 2 free stocks): https://act.webull.com/kol-us/share.html?hl=en&inviteCode=iKJHc5TS9HSe // SOCIAL ► Website: https://www.optimizedportfolio.com/ ► Patreon: https://www.patreon.com/optimizedportfolio ► Facebook: https://www.facebook.com/optimizedportfolio/ ► Instagram: https://www.instagram.com/optimizedportfolio/ ► Twitter: https://twitter.com/OptimizedPort ► Support my channel by shopping on Amazon (free for you): https://amzn.to/2TLCgCc I appreciate all the support! Disclaimer: This is not financial advice, investing advice, or tax advice. The information presented is for informational, educational, and entertainment purposes only. Investment products discussed are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here: https://www.optimizedportfolio.com/terms/ Disclosure: Some of the links above are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality content on this channel and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful.