High Yield Funds at Fidelity

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bogleboy
Posts: 106
Joined: Sat Apr 28, 2012 9:02 am

High Yield Funds at Fidelity

Post by bogleboy » Sun Nov 26, 2017 10:39 pm

Hi All,

Does Fidelity have any high yield cash accounts like the AMEX Personal Savings 1.25%? I was told on the telephone by a rep that there is a fund that provides 1.1% and requires $100,000 to buy in. I thought the rep said FDRXX but I must have heard wrong. Any ideas?

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whodidntante
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Re: High Yield Funds at Fidelity

Post by whodidntante » Sun Nov 26, 2017 10:42 pm

You can get 1% pretty easily. Open a CMA account and use it to buy SPRXX Fidelity Money Market. Due to the rules for the account this money will be available for cash management spending. They automatically sell shares to cover your debits at the end of the trading day. I use it as my main checking account.

Valuethinker
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Re: High Yield Funds at Fidelity

Post by Valuethinker » Mon Nov 27, 2017 6:33 am

whodidntante wrote:
Sun Nov 26, 2017 10:42 pm
You can get 1% pretty easily. Open a CMA account and use it to buy SPRXX Fidelity Money Market. Due to the rules for the account this money will be available for cash management spending. They automatically sell shares to cover your debits at the end of the trading day. I use it as my main checking account.
I think the OP should also read up about the new Money Market Fund rules that have been brought in by the US government.

As I understand it, it is now possible to "break the buck" on an MMF (for some funds). OP needs to understand what their risk is in doing this.

We had people here who were investors in the Primary Reserve Fund-- it was not a fun ride, having your assets frozen for months, and for some part of them, for years (there's outstanding litigation so apparently the last payment has not been released to investors, according to one poster here who was an investor).

bogleboy
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Re: High Yield Funds at Fidelity

Post by bogleboy » Mon Nov 27, 2017 1:17 pm

whodidntante wrote:
Sun Nov 26, 2017 10:42 pm
You can get 1% pretty easily. Open a CMA account and use it to buy SPRXX Fidelity Money Market. Due to the rules for the account this money will be available for cash management spending. They automatically sell shares to cover your debits at the end of the trading day. I use it as my main checking account.
Whodidntante, Thank you!

1. Can you share where you get the 1%? I see .77% YTD.

2. How exactly does the account work with SPRXX? Do I purchase X amount of SPRXX and then the daily debits will be taken from SPRXX at the end of the day before they're taken from cash?

3. When more money enters the account, do I need to constantly purchase more SPRXX?

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whodidntante
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Re: High Yield Funds at Fidelity

Post by whodidntante » Mon Nov 27, 2017 2:06 pm

bogleboy wrote:
Mon Nov 27, 2017 1:17 pm
whodidntante wrote:
Sun Nov 26, 2017 10:42 pm
You can get 1% pretty easily. Open a CMA account and use it to buy SPRXX Fidelity Money Market. Due to the rules for the account this money will be available for cash management spending. They automatically sell shares to cover your debits at the end of the trading day. I use it as my main checking account.
Whodidntante, Thank you!

1. Can you share where you get the 1%? I see .77% YTD.

2. How exactly does the account work with SPRXX? Do I purchase X amount of SPRXX and then the daily debits will be taken from SPRXX at the end of the day before they're taken from cash?

3. When more money enters the account, do I need to constantly purchase more SPRXX?
1. Look at the 7 day yield. That is the best estimate of forward return for a MMF. You don't care about YTD because that is backward looking.
2. To meet debits they'll first drain your core account to zero, and then sell your MMF shares at the end of the trading day to meet any shortfall.
3. Yes. You can buy as soon as the cash is available to trade. Fidelity is pretty generous about when they consider cash available to trade compared to other brokers I use. However, make sure you understand their funds availability policies on withdrawals so you do not inadvertently overdraw your account.

eg1
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Re: High Yield Funds at Fidelity

Post by eg1 » Mon Nov 27, 2017 3:42 pm

whodidntante wrote:
Mon Nov 27, 2017 2:06 pm

2. To meet debits they'll first drain your core account to zero, and then sell your MMF shares at the end of the trading day to meet any shortfall.
How does this work come tax time? Do you have to do a bunch of capital gains calculations?

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welderwannabe
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Re: High Yield Funds at Fidelity

Post by welderwannabe » Mon Nov 27, 2017 3:56 pm

Valuethinker wrote:
Mon Nov 27, 2017 6:33 am
]

I think the OP should also read up about the new Money Market Fund rules that have been brought in by the US government.

As I understand it, it is now possible to "break the buck" on an MMF (for some funds). OP needs to understand what their risk is in doing this.
TLDR;

IMHO, the new rules should actually make it less likely for a fund to break the buck.


The long strokes:

They really tightened up the requirements as to the percentage of fund assets that mature in under a week etc. While this may make the MMFs return less it makes them 'safer'. There are also redemption fees and gates that can be imposed to slow redemptions during runs on the money market. These can start when the fund's weekly liquidity level falls below 30%.

Money markets are also now broken up into classes. There are retail money markets like Vanguards Prime MMF which have a fixed NAV but can only be held by individuals and not companies. There are government money markets, like Vanguard's Federal MMF which must invest in government securities only BUT they have a fixed NAV and can be held by both individuals and companies. Then there are institutional MMFs which have a floating NAV but can be held by anyone.

The fixed NAV is advantageous for the regular investor to avoid having to deal with capital gains/losses on every redemption.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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whodidntante
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Re: High Yield Funds at Fidelity

Post by whodidntante » Mon Nov 27, 2017 6:59 pm

eg1 wrote:
Mon Nov 27, 2017 3:42 pm
whodidntante wrote:
Mon Nov 27, 2017 2:06 pm

2. To meet debits they'll first drain your core account to zero, and then sell your MMF shares at the end of the trading day to meet any shortfall.
How does this work come tax time? Do you have to do a bunch of capital gains calculations?
Capital gains on a money market fund are de minimis. No cap gains tax is due.

Chip
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Joined: Wed Feb 21, 2007 4:57 am

Re: High Yield Funds at Fidelity

Post by Chip » Tue Nov 28, 2017 7:12 am

bogleboy wrote:
Sun Nov 26, 2017 10:39 pm
Hi All,

Does Fidelity have any high yield cash accounts like the AMEX Personal Savings 1.25%? I was told on the telephone by a rep that there is a fund that provides 1.1% and requires $100,000 to buy in. I thought the rep said FDRXX but I must have heard wrong. Any ideas?
The Fidelity money market fund you're looking for is FZDXX.

The 100k minimum is for taxable accounts. It drops to 10k for IRAs.

bawr
Posts: 62
Joined: Thu May 19, 2011 9:10 pm

Re: High Yield Funds at Fidelity

Post by bawr » Wed Nov 29, 2017 9:17 pm

I currently have my "cash" at Fidelity in a blend of the following funds:

FZDXX Fidelity Money Market Fund Premium Class. SEC yield: 1.12%
FFRHX Fidelity Floating Rate High Income Fund. SEC yield: 3.46%. Duration: 0.22 years
PSHDX PIMCO Short-Term Fund Class D. SEC yield: 1.54%. Duration: 0.00 years

The blend I have has a yield of 1.59%, and a total return that is a bit higher, due to capital gains in PSHDX and FFRHX. These two funds fluctuate in price, and the latter holds junk rated notes. This is acceptable to me, but may not be suitable for other investors.

MrPotatoHead
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Re: High Yield Funds at Fidelity

Post by MrPotatoHead » Wed Nov 29, 2017 10:24 pm

Another option is to look at CDs and Treasuries, here are today's yields from Fidelity.
You can get higher yield by spacing them every 3 months and then reinvesting. With rates poised to potentially rise this might be a good idea. If you need immediate liquidity keep 3 months in the money market instrument of choice.

3mo 6mo 9mo 1yr 2yr 3yr 5yr
1.35% 1.45% 1.55% 1.65% 1.95% 2.10% 2.50% CDs

1.26% 1.41% 1.58% 1.66% 1.77% 1.89% 2.12% Treasury bills

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