Fidelity money market options

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Fidelity money market options

Postby feh » Thu Jun 27, 2013 12:29 pm

Hi folks.

I have a small amount of "cash" in a Fidelity traditional IRA. The default money market account used by Fidelity seems to be SPAXX. It yields next to nothing, but nevertheless has an expense ratio.

They have many "money market" funds available. A question for other Fidelity customers - what money market fund do you use?

Thanks.
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Re: Fidelity money market options

Postby hayling » Thu Jun 27, 2013 2:51 pm

feh wrote:The default money market account used by Fidelity seems to be SPAXX. It yields next to nothing, but nevertheless has an expense ratio.

Thanks for pointing this out. I didn't realize that SPAXX has an expense ratio; that's what I'm using as well. I'm interested in hearing responses to this question. Looks like FDRXX (Fidelity Cash Reserves) has a slightly lower expense ratio (0.38% vs. 0.42% on SPAXX).

According to the "What are the investment options for my core account?" FAQ on this page: https://www.fidelity.com/trading/faqs-about-account you apparently can choose between SPAXX, FDRXX, or a "FDIC Insured Sweep Account". Not sure what that last option is about.
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Re: Fidelity money market options

Postby Ged » Thu Jun 27, 2013 11:12 pm

Many of the large mutual funds are waiving expenses for MM funds. With QE it's pretty much impossible to get any useful return on the ultrashort bonds that MM funds are based on. There are lots of articles out there talking about how many of these funds may be discontinued if the situation doesn't change.
Lack of planning on your part does not constitute an emergency on my part.
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Re: Fidelity money market options

Postby Rainier » Fri Jun 28, 2013 6:21 am

There's no secret high yield mm fund that you are missing out on. They all yield about .01 and you obviously don't pay the fee you see....does cash get taken out in fees every month? Of course not.

Either invest it or hang on for now.
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Re: Fidelity money market options

Postby Call_Me_Op » Fri Jun 28, 2013 7:04 am

hayling wrote:
feh wrote:The default money market account used by Fidelity seems to be SPAXX. It yields next to nothing, but nevertheless has an expense ratio.

Thanks for pointing this out. I didn't realize that SPAXX has an expense ratio; that's what I'm using as well. I'm interested in hearing responses to this question. Looks like FDRXX (Fidelity Cash Reserves) has a slightly lower expense ratio (0.38% vs. 0.42% on SPAXX).

According to the "What are the investment options for my core account?" FAQ on this page: https://www.fidelity.com/trading/faqs-about-account you apparently can choose between SPAXX, FDRXX, or a "FDIC Insured Sweep Account". Not sure what that last option is about.


They all have expense ratios - and the expenses (today) are generally much greater than the yield they pay.

Incidentally, until these funds start paying more than 1 basis point of interest, in my view we have not fully exited the Great Recession.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: Fidelity money market options

Postby mbenz1997 » Fri Jun 28, 2013 9:23 am

So I just got off the phone with fidelity and they told me the yield is after the expense ratio is taken out.

For fmoxx, that means that your yield is 0.01% after they take their expense ratio, so you aren't losing any of your capital.


To OP- good catch. I've had a fidelity account for 8 years and never once caught that...then again, I watch my money like a hawk and would have noticed if any had gone missing :greedy
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Re: Fidelity money market options

Postby petercooperjr » Fri Jun 28, 2013 9:28 am

Since they're all the same in terms of yield, I'd go with the "FDIC Sweep Account". Basically, they set something up transparently with banks that is kind of like a brokered CD, where you see the money in your account with Fidelity, but since the obligation is held by a real bank as a deposit it's FDIC insured. It asks just like a money market in terms of how the sweep account works, though.

If you're going to get paid next to nothing, it might as well be insured.
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Re: Fidelity money market options

Postby feh » Fri Jun 28, 2013 9:30 am

mbenz1997 wrote:So I just got off the phone with fidelity and they told me the yield is after the expense ratio is taken out.

For fmoxx, that means that your yield is 0.01% after they take their expense ratio, so you aren't losing any of your capital.


To OP- good catch. I've had a fidelity account for 8 years and never once caught that...then again, I watch my money like a hawk and would have noticed if any had gone missing :greedy


I just got done w/ a chat session w/ Fidelity and was told the same thing. It would be nice if they noted the ER is not being paid by the customer on the web site; would've avoided some confusion.
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Re: Fidelity money market options

Postby feh » Fri Jun 28, 2013 9:37 am

I also learned via the chat session that brokered CDs are offered. The rates stink, but it's better than .01%, if you know you're gonna park the money for a while:

https://fixedincome.fidelity.com/ftgw/fi/FICorpNotesDisplay?name=CD
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Re: Fidelity money market options

Postby mbenz1997 » Fri Jun 28, 2013 7:38 pm

At the risk of sounding naive, is there any underlying risk to these CDs? Most, even the ones by foreign banks, are FDIC insured.
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Re: Fidelity money market options

Postby MN Finance » Fri Jun 28, 2013 11:02 pm

For all mutual funds yields and returns are net of fees. This isnt something that needs to be specifically identified for money market funds. They are not special in any way.

Brokered Cds are basically bonds. Youll likely be better off in a high yield savings account or at a traditional bank or credit union. Brokered cds will trade up/down, so the value is not constant. Otoh you can sell w/o penalty but subject to what a buyer will pay. Most "cash people" dont love them.
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Re: Fidelity money market options

Postby feh » Fri Jun 28, 2013 11:27 pm

MN Finance wrote:Brokered Cds are basically bonds. Youll likely be better off in a high yield savings account or at a traditional bank or credit union.


For a taxable account, I agree. In my case, this is a traditional IRA, so the money needs to stay in the account.
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