FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

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protagonist
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FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by protagonist »

Today I moved all my cash in Fidelity from FZFXX (Fidelity Treasury MM Fund- 1.37% yield) to FZDXX (Fidelity MM Premium Class- 1.81%).

My understanding is that you can buy FZDXX with an initial deposit of $100K, after which there is no minimum balance and no other disadvantages vs. FZFXX.

I was told that both MM accounts are equally insured (SIPC not FDIC).

Am I missing anything here?

And is there any significant disadvantage in security , compared with keeping cash in an external bank account? (I know there are bank accounts that are offering slightly better interest rates).
Last edited by protagonist on Fri May 25, 2018 7:28 am, edited 1 time in total.
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Re: FZDXX- 1.81%. Security?

Post by aj76er »

FZFXX has ~50% in U.S. Treasuries. E/R = 42bps
FZDXX has ~30% in CDs and ~30% in commercial paper. E/R = 0.3%

So, FZDXX is a little more risky with lower ER which results in higher yield.

Neither is FDIC insured. But I would consider both as very safe.

As an alternative, for virtually no risk and about the same yield, you could purchase 3mo. T-bills directly at auction through Fidelity. I believe the next auction is coming up on 5/29.
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protagonist
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Re: FZDXX- 1.81%. Security?

Post by protagonist »

aj76er wrote: Fri May 25, 2018 12:21 am FZFXX has ~50% in U.S. Treasuries. E/R = 42bps
FZDXX has ~30% in CDs and ~30% in commercial paper. E/R = 0.3%

So, FZDXX is a little more risky with lower ER which results in higher yield.

Neither is FDIC insured. But I would consider both as very safe.

As an alternative, for virtually no risk and about the same yield, you could purchase 3mo. T-bills directly at auction through Fidelity. I believe the next auction is coming up on 5/29.
Thanks.
I use my Fidelity account as a checking account, so 3 mo T-bills would not work.
I realize there is no FDIC insurance, but the rep told me that it had "SIPC insurance", which I realize only provides coverage if Fidelity goes bankrupt. This was always my understanding, but it was presented differently to me over the phone. I think the rep did not really understand the concept.
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Re: FZDXX- 1.81%. Security?

Post by corn18 »

protagonist wrote: Thu May 24, 2018 11:12 pm
My understanding is that you can buy FZDXX with an initial deposit of $100K, after which there is no minimum balance and no other disadvantages vs. FZFXX.
I don't think this is true. Might want to call FIDO to verify.
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protagonist
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Re: FZDXX- 1.81%. Security?

Post by protagonist »

corn18 wrote: Fri May 25, 2018 8:15 am
protagonist wrote: Thu May 24, 2018 11:12 pm
My understanding is that you can buy FZDXX with an initial deposit of $100K, after which there is no minimum balance and no other disadvantages vs. FZFXX.
I don't think this is true. Might want to call FIDO to verify.
I think you are right, and I was given wrong information by the Fidelity rep. I specifically asked him: "So if my balance drops to $1 or less, would I still get the stated yield?" and he confirmed that I would. But I just looked up FZDXX and it states "required balance: $10000". I don't know what happens if that required balance is not met. I will have to give Fidelity another call. Thanks.
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Re: FZDXX- 1.81%. Security?

Post by aj76er »

protagonist wrote: Fri May 25, 2018 7:27 am
aj76er wrote: Fri May 25, 2018 12:21 am FZFXX has ~50% in U.S. Treasuries. E/R = 42bps
FZDXX has ~30% in CDs and ~30% in commercial paper. E/R = 0.3%

So, FZDXX is a little more risky with lower ER which results in higher yield.

Neither is FDIC insured. But I would consider both as very safe.

As an alternative, for virtually no risk and about the same yield, you could purchase 3mo. T-bills directly at auction through Fidelity. I believe the next auction is coming up on 5/29.
Thanks.
I use my Fidelity account as a checking account, so 3 mo T-bills would not work.
I realize there is no FDIC insurance, but the rep told me that it had "SIPC insurance", which I realize only provides coverage if Fidelity goes bankrupt. This was always my understanding, but it was presented differently to me over the phone. I think the rep did not really understand the concept.
So, I'm curious - would you be using the money market like a savings account In your brokerage or within the checking account itself? Or would you be switching the core position in the checking account over to the money market? I've actually been thinking of doing something similar for a while, as it would help consolidate and simplify financial accounts. At Fido, I think the following are viable options for a savings account-like vehicle:

* A money market such as the ones you suggested. SPRXX might another decent option for you. ~1.7% yield with a $2500 min
* A short term Bond fund, such as FSITX FSBAX (note: There may be short-term redemption fees)
* A short-term bond ETF, such as SHV, SHY, or SUB (or a combination)

* Edited to correct fund name
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protagonist
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Re: FZDXX- 1.81%. Security?

Post by protagonist »

aj76er wrote: Fri May 25, 2018 10:23 am
protagonist wrote: Fri May 25, 2018 7:27 am
aj76er wrote: Fri May 25, 2018 12:21 am FZFXX has ~50% in U.S. Treasuries. E/R = 42bps
FZDXX has ~30% in CDs and ~30% in commercial paper. E/R = 0.3%

So, FZDXX is a little more risky with lower ER which results in higher yield.

Neither is FDIC insured. But I would consider both as very safe.

As an alternative, for virtually no risk and about the same yield, you could purchase 3mo. T-bills directly at auction through Fidelity. I believe the next auction is coming up on 5/29.
Thanks.
I use my Fidelity account as a checking account, so 3 mo T-bills would not work.
I realize there is no FDIC insurance, but the rep told me that it had "SIPC insurance", which I realize only provides coverage if Fidelity goes bankrupt. This was always my understanding, but it was presented differently to me over the phone. I think the rep did not really understand the concept.
So, I'm curious - would you be using the money market like a savings account In your brokerage or within the checking account itself? Or would you be switching the core position in the checking account over to the money market? I've actually been thinking of doing something similar for a while, as it would help consolidate and simplify financial accounts. At Fido, I think the following are viable options for a savings account-like vehicle:

* A money market such as the ones you suggested. SPRXX might another decent option for you. ~1.7% yield with a $2500 min
* A short term Bond fund, such as FSITX FSBAX (note: There may be short-term redemption fees)
* A short-term bond ETF, such as SHV, SHY, or SUB (or a combination)

* Edited to correct fund name
For years I have used FZFXX (and its previous incarnation) as my primary checking account, even when it was accruing essentially no interest. I have a separate high yield online bank tied to my fidelity account where I keep the bulk of my cash. I would transfer just enough into Fidelity to cover a month or so of expenses at a time. That has worked extremely well...transfers between the two have rarely if ever taken more than one working day.... though if I could keep everything at Fidelity it would obviously be better. There are online banks offering 2% interest, or close to it. (I also have an account at a local bank that I just use for convenience when necessary). At 1.81% I probably wouldn't bother with external accounts if I didn't have to monitor my balance (the difference between 1.81% and 2.01%, for example, is only $20 of interest per $10K per year). But for large amounts it would be nice to know you have FDIC. I don't know what happens if you go below the minimum balance....I will have to call Fido at some point and figure out what to do from there.

An advantage to using Fidelity as your primary checking account is that they reimburse all ATM fees and don't "nickel-and-dime" you...plus if you accidentally have the equivalent of an "overdraft" you are covered (assuming you have enough other Fido investments) and only have to pay margin interest until you get back into positive territory, rather than usurious bank fees and credit issues.

Having to maintain a minimum balance in my Fidelity "checking account" would defeat its purpose, so I will probably switch back to FZFXX once I invest most of my "windfall"... I rarely have kept more than a few thousand dollars in FZFXX for more than a week at a time. For now FZDXX will work as a "holding tank" since I recently received a large amount from a house sale, until I invest it all.
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Re: FZDXX- 1.81%. Security?

Post by indexfundfan »

Here is the minimum balance requirement in the prospectus

Fidelity may deduct a small balance maintenance fee of $12.00 from a fund balance with a value of less than $2,000 in shares. It is expected that fund balances will be valued after November 1 but prior to December 31 of each calendar year. Fund positions opened after September 30 will not be subject to the fee for that calendar year. The fee, which is payable to Fidelity, is designed to offset in part the relatively higher costs of servicing smaller fund positions. This fee will not be deducted from fund positions opened after January 1 of that calendar year if those positions use certain regular investment plans.

If your fund balance falls below $10,000 worth of shares ($500 for fund balances in Fidelity® Simplified Employee Pension-IRA, Keogh, and Investment Only Retirement accounts) for any reason and you do not increase your balance, Fidelity may sell all of your shares and send the proceeds to you after providing you with at least 30 days' notice to reestablish the minimum balance. Your shares will be sold at the NAV, minus any applicable shareholder fees, on the day Fidelity closes your fund position. Certain fund positions are not subject to these balance requirements and will not be closed for failure to maintain a minimum balance.


So I think it is safe to just keep it above $2,000, at least between Nov 1 and Dec 31. If Fidelity wants to enforce the $10,000 minimum, you will have a 30-day notice to either top-up or revert to SPRXX.
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Re: FZDXX- 1.81%. Security?

Post by wintermute »

+1 on buying Tbills at auction, but GABXX is also an option. It's useful if you can't trade bonds or buy Vanguard's VUSXX treasury MM fund (like at Wellstrade). Current 7-day for GABXX is 1.69%, ER is 0.08%, vs 1.74% and 0.09% for VUSXX.
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Re: FZDXX- 1.81%. Security?

Post by indexfundfan »

wintermute wrote: Sun May 27, 2018 12:24 pm +1 on buying Tbills at auction, but GABXX is also an option. It's useful if you can't trade bonds or buy Vanguard's VUSXX treasury MM fund (like at Wellstrade). Current 7-day for GABXX is 1.69%, ER is 0.08%, vs 1.74% and 0.09% for VUSXX.
Where can you buy GABXX?
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Re: FZDXX- 1.81%. Security?

Post by wintermute »

indexfundfan wrote: Sun May 27, 2018 12:45 pm Where can you buy GABXX?
Wellstrade, at least. I don't know about other brokerages.
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Re: FZDXX- 1.81%. Security?

Post by Bronco Billy »

aj76er wrote: Fri May 25, 2018 12:21 am FZFXX has ~50% in U.S. Treasuries. E/R = 42bps
FZDXX has ~30% in CDs and ~30% in commercial paper. E/R = 0.3%

So, FZDXX is a little more risky with lower ER which results in higher yield.

Neither is FDIC insured. But I would consider both as very safe.

As an alternative, for virtually no risk and about the same yield, you could purchase 3mo. T-bills directly at auction through Fidelity. I believe the next auction is coming up on 5/29.
Thanks.
I use my Fidelity account as a checking account, so 3 mo T-bills would not work.
I realize there is no FDIC insurance, but the rep told me that it had "SIPC insurance", which I realize only provides coverage if Fidelity goes bankrupt. This was always my understanding, but it was presented differently to me over the phone. I think the rep did not really understand the concept.
[/quote]


[/quote]

For years I have used FZFXX (and its previous incarnation) as my primary checking account, even when it was accruing essentially no interest. I have a separate high yield online bank tied to my fidelity account where I keep the bulk of my cash. I would transfer just enough into Fidelity to cover a month or so of expenses at a time. That has worked extremely well...transfers between the two have rarely if ever taken more than one working day.... though if I could keep everything at Fidelity it would obviously be better. There are online banks offering 2% interest, or close to it. (I also have an account at a local bank that I just use for convenience when necessary). At 1.81% I probably wouldn't bother with external accounts if I didn't have to monitor my balance (the difference between 1.81% and 2.01%, for example, is only $20 of interest per $10K per year). But for large amounts it would be nice to know you have FDIC. I don't know what happens if you go below the minimum balance....I will have to call Fido at some point and figure out what to do from there.

An advantage to using Fidelity as your primary checking account is that they reimburse all ATM fees and don't "nickel-and-dime" you...plus if you accidentally have the equivalent of an "overdraft" you are covered (assuming you have enough other Fido investments) and only have to pay margin interest until you get back into positive territory, rather than usurious bank fees and credit issues.

Having to maintain a minimum balance in my Fidelity "checking account" would defeat its purpose, so I will probably switch back to FZFXX once I invest most of my "windfall"... I rarely have kept more than a few thousand dollars in FZFXX for more than a week at a time. For now FZDXX will work as a "holding tank" since I recently received a large amount from a house sale, until I invest it all.
[/quote]

Where or when do see what interest you have made. I purchased 165k of FZDXX and called Fidelity said i would see it at the end of the month.
Thanks,
BB
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Re: FZDXX- 1.81%. Security?

Post by zeugmite »

indexfundfan wrote: Sun May 27, 2018 11:50 am Here is the minimum balance requirement in the prospectus

Fidelity may deduct a small balance maintenance fee of $12.00 from a fund balance with a value of less than $2,000 in shares. It is expected that fund balances will be valued after November 1 but prior to December 31 of each calendar year. Fund positions opened after September 30 will not be subject to the fee for that calendar year. The fee, which is payable to Fidelity, is designed to offset in part the relatively higher costs of servicing smaller fund positions. This fee will not be deducted from fund positions opened after January 1 of that calendar year if those positions use certain regular investment plans.

If your fund balance falls below $10,000 worth of shares ($500 for fund balances in Fidelity® Simplified Employee Pension-IRA, Keogh, and Investment Only Retirement accounts) for any reason and you do not increase your balance, Fidelity may sell all of your shares and send the proceeds to you after providing you with at least 30 days' notice to reestablish the minimum balance. Your shares will be sold at the NAV, minus any applicable shareholder fees, on the day Fidelity closes your fund position. Certain fund positions are not subject to these balance requirements and will not be closed for failure to maintain a minimum balance.


So I think it is safe to just keep it above $2,000, at least between Nov 1 and Dec 31. If Fidelity wants to enforce the $10,000 minimum, you will have a 30-day notice to either top-up or revert to SPRXX.
I don't see the $12.00 section in the Prospectus. Has this changed? On the fund page itself it also says the required balance is $100,000. Is it $100,000 or $10,000 then?
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protagonist
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Re: FZDXX- 1.81%. Security?

Post by protagonist »

My understanding is that you need an initial investment of $100K to get into FZDXX, but once in you technically only have to maintain a balance above 10K.
FWIW I have dipped below the 10K limit in FZDXX more than once (in fact, I am below that limit now), and I have never had a problem with being bounced out.
The 7 day yield as of 8/26/19 was 2.02% (compound effective 2.04%). It was 2.20%/2.22% on July 31.
The 1.81% figure was over a year old.
I find it very convenient to use Fidelity as my primary checking account.
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by Lyrrad »

zeugmite wrote: Tue Aug 27, 2019 10:27 pm I don't see the $12.00 section in the Prospectus. Has this changed? On the fund page itself it also says the required balance is $100,000. Is it $100,000 or $10,000 then?
I believe it has been eliminated.

I recall having a chat earlier this year with a Fidelity representative and I was told that minimum balance fees were eliminated on all of their funds, including FZDXX. At the time, I had found old PDF files on their site listing a minimum balance fee on some funds, but I can't find a record of that on their site anymore.

It does look like they still reserve the right to redeem positions of less than $10,000 with 30 days notice, but I haven't received that kind of notice yet, and I've been below that limit in some accounts for a few months.
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by vtMaps »

The minimum initial investment in FZDXX is $100k, but that applies to taxable accounts. The minimum initial investment in an IRA is $10k, and there is no minimum for additional investments.

reference: https://fundresearch.fidelity.com/mutua ... e=o-NavBar

I use FZDXX in a Roth IRA as a savings account... no tax on the earned interest. My initial purchase was $10k, but I usually maintain a much lower balance. When I need to pay bills, I transfer some to my CMA.

When I need cash from my traditional IRA, rather than taking a distribution and putting the money in a taxable savings account, I convert it to Roth and let it sit in FZDXX while it waits to be spent.

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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by Ferdinand2014 »

protagonist wrote: Thu May 24, 2018 11:12 pm Today I moved all my cash in Fidelity from FZFXX (Fidelity Treasury MM Fund- 1.37% yield) to FZDXX (Fidelity MM Premium Class- 1.81%).

My understanding is that you can buy FZDXX with an initial deposit of $100K, after which there is no minimum balance and no other disadvantages vs. FZFXX.

I was told that both MM accounts are equally insured (SIPC not FDIC).

Am I missing anything here?

And is there any significant disadvantage in security , compared with keeping cash in an external bank account? (I know there are bank accounts that are offering slightly better interest rates).
FDLXX (Treasury only money market) yields 1.74%. It has a zero minimum balance. It is 100% pure treasury bills/coupons and is by far the most liquid at 1 and 7 days of over 99%. SEC requires 10% and 30%. I use this and 4 week T-bills through auction with auto roll which is completely free at Fido. If you need to sell the T-bills they will sell and be available in account within 24 hours of a business week.

https://fundresearch.fidelity.com/mutua ... e=o-NavBar
https://fundresearch.fidelity.com/mutua ... e=o-NavBar


Bond page for T-bills:
https://fixedincome.fidelity.com/ftgw/fi/FILanding
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Gadget
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by Gadget »

For what it's worth, I use FZDXX as my default fund for my checking account. Once I reached the initial investment of $100k, it's always been well below that. I know I've dropped it below $10k sometimes with no issues, but I also almost always have more than $10k so I'm not sure how much they enforce that.
drzzzzz
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by drzzzzz »

Also use FZDXX in both a ROTH, traditional IRA, and regular accounts - my balances after setting up FZDXX are always below their stated thresholds in all the accounts, but I do realize they could say I am below and switch me to something else - will cross that bridge if it occurs.
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protagonist
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by protagonist »

Ferdinand2014 wrote: Wed Aug 28, 2019 9:22 am
protagonist wrote: Thu May 24, 2018 11:12 pm Today I moved all my cash in Fidelity from FZFXX (Fidelity Treasury MM Fund- 1.37% yield) to FZDXX (Fidelity MM Premium Class- 1.81%).

My understanding is that you can buy FZDXX with an initial deposit of $100K, after which there is no minimum balance and no other disadvantages vs. FZFXX.

I was told that both MM accounts are equally insured (SIPC not FDIC).

Am I missing anything here?

And is there any significant disadvantage in security , compared with keeping cash in an external bank account? (I know there are bank accounts that are offering slightly better interest rates).
FDLXX (Treasury only money market) yields 1.74%. It has a zero minimum balance. It is 100% pure treasury bills/coupons and is by far the most liquid at 1 and 7 days of over 99%. SEC requires 10% and 30%. I use this and 4 week T-bills through auction with auto roll which is completely free at Fido. If you need to sell the T-bills they will sell and be available in account within 24 hours of a business week.

https://fundresearch.fidelity.com/mutua ... e=o-NavBar
https://fundresearch.fidelity.com/mutua ... e=o-NavBar


Bond page for T-bills:
https://fixedincome.fidelity.com/ftgw/fi/FILanding
Thanks!
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by alx »

I was reading this old thread and got interested in FZFXX.

A Fidelity representative told me today that I need $100K to buy FZFXX in my taxable account but then it's perfectly fine for the balance to go down all the way to any small non-zero amount. If I sell it all, though, I'd need to re-qualify ($100K) to buy into it again.

Buying FZFXX from other accounts is also fine and it doesn't need to be $100K to qualify for it initially, if I have qualified in my other accounts already.
Transferring FZFXX shares from one account to another is also fine.

The only downside to FZFXX that I see is that in order to buy something like ITOT which is an ETF, I'd have to sell FZXX first, wait to settle, then buy. But, for something like FZROX (which a mutual fund, like FZFXX) it's easy: a single sell-and-buy transaction.
123
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by 123 »

alx wrote: Fri Feb 28, 2020 9:26 pm ...The only downside to FZFXX that I see is that in order to buy something like ITOT which is an ETF, I'd have to sell FZXX first, wait to settle, then buy. But, for something like FZROX (which a mutual fund, like FZFXX) it's easy: a single sell-and-buy transaction.
This has not been my experience. FZDXX, a purchased money fund, is just an alternate MMF in your account. I routinely buy FZDXX with any loose cash that sits in our Fidelity account. When I make a securities purchase, like I did yesterday and today when prices were favorable, Fidelity automatically redeems shares in FZDXX to pay for the securities. An extra manual step, which would delay availability of funds, is not necessary.
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alx
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Re: FZDXX- 1.81%. Security? [Fidelity Treasury Money Market]

Post by alx »

123 wrote: Fri Feb 28, 2020 9:39 pm
alx wrote: Fri Feb 28, 2020 9:26 pm ...The only downside to FZFXX that I see is that in order to buy something like ITOT which is an ETF, I'd have to sell FZXX first, wait to settle, then buy. But, for something like FZROX (which a mutual fund, like FZFXX) it's easy: a single sell-and-buy transaction.
This has not been my experience. FZDXX, a purchased money fund, is just an alternate MMF in your account. I routinely buy FZDXX with any loose cash that sits in our Fidelity account. When I make a securities purchase, like I did yesterday and today when prices were favorable, Fidelity automatically redeems shares in FZDXX to pay for the securities. An extra manual step, which would delay availability of funds, is not necessary.
Yes, you're right. Thank you for taking the time to correct this. Indeed, I was misinformed.

It's what I was told by the rep yesterday. However, I just looked at it this morning and I can clearly see that I can purchase ETF/stock directly from the account where I only have FZFXX and nothing else. I'm sitting at preview order and nothing is preventing me from doing it.

I also called Fidelity again this morning and they confirmed. I think the first rep was an "Account Support" rep ("General help, account features, and cash management assistance") and the second was a "Trading & Transactions" rep ("Trading questions and features, transfers, deposits, withdrawals and distributions"). The second rep told me that the first rep was right in general (you have to sell a mutual fund before you buy an ETF) but that FZFXX is a money market mutual fund which allows you to buy directly.

Sorry about the noise and hope this clarifies it.
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