How to Earn Safe Cash with a Fidelity Government Money Market Fund in 2023

Larry, Managing Editor

fidelity government money market funds earn safe simple easy cash income

Fidelity government money market funds hold almost 100% of their assets in U.S. Treasury bills, virtually risk-free investments that pay a yield. Government money market funds are superior to keeping cash in bank or savings accounts that generate lower yields. Let’s dive into why government money market funds are safe and simple investments for many Fidelity customers to park their cash.

What Is a Fidelity Government Money Market Fund?

Money market funds are low-risk mutual funds that preserve cash while earning a yield. Government money market funds are the safest type of money market fund and are a great way for Fidelity investors to start earning more yield on their cash with minimal risk.

Government money market funds invest primarily in short-term, high-quality government securities, such as Treasury bills, notes, and bonds. These securities generate a yield that Fidelity passes onto you. These yields are usually much higher than what you would get with traditional savings accounts.

The market for Fidelity government money market funds is highly liquid. As a result, they’re easily bought and sold. Fidelity treats all its money market funds as cash, so you can instantly liquidate whenever you need access to your money.

Government Money Market Funds Are Heavily Regulated

The SEC requires that government money market funds invest 99.5% of their funds in highly liquid assets, such as cash, government securities, and fully collateralized repurchase agreements. As a result, Fidelity must ensure that their government money market funds are allocated to these secure investments.

Government money market funds typically have a stable net asset value (NAV) of $1 per share, meaning they strive to maintain a constant share price. For investors, this means that the price at which you buy or sell shares in the fund remains the same.

Top Choices for Fidelity Government Money Market Funds

Fidelity government money market funds are among the most popular. Here is a comprehensive list of all the government money market funds that Fidelity offers:

  • Fidelity Government Money Market Fund (SPAXX)
  • Fidelity Government Money Market Fund – Premium Class (FZCXX)
  • Fidelity Government Cash Reserves (FDRXX)
  • Fidelity Investments Money Market Government Portfolio – Class I (FIGXX)
  • Fidelity Investments Money Market Government Portfolio – Institutional Class (FRGXX)
  • Fidelity Investments Money Market Treasury Only- Class I (FSIXX)
  • Fidelity Investments Money Market Treasury Only- Institutional Class (FRSXX)
  • Fidelity Investments Money Market Treasury- Class I (FISXX)
  • Fidelity Investments Money Market Treasury- Institutional Class (FRBXX)
  • Fidelity Treasury Money Market Fund (FZFXX)
  • Fidelity Treasury Only Money Market Fund (FDLXX)

The three most popular Fidelity government money market funds are SPAXX, FDRXX, and FZFXX. As of the time of publication, SPAXX has roughly $330 billion of assets managed. FDRXX manages around $228 billion, and FZFXX has around $45 billion.

These three funds are popular given that they are some of Fidelity’s “default” core positions. SPAXX and FZFXX are core position options for a Fidelity brokerage account. FDRXX is available as a core position for your Fidelity IRA or Health Savings Account.

Why Cash In A Government Money Market Fund From Fidelity Is Better Than Your Bank

A government money market fund from Fidelity offers many money benefits compared to keeping your money in a bank. From greater returns to higher liquidity and lower costs, Fidelity government money market funds are better than a savings account in almost all regards.

Here’s why you should buy a Fidelity government money market instead of keeping that cash in your bank.

  1. Higher Yield: Fidelity government money market funds, such as SPAXX and FDRXX, usually offer higher yields than traditional bank savings accounts. Right now, those funds are paying around 5%.
  2. Very Low Risk: Government money market funds are regulated by the Securities and Exchange Commission (SEC) and are subject to strict investment guidelines. They are required to invest in high-quality, low-risk government securities, making them relatively safe and stable investment options.
  3. Liquidity: Most bank accounts and savings accounts have rigid withdrawal restrictions or penalties. Some even charge a fee to maintain your cash. On the other hand, Fidelity government money market funds are popular investments and very liquid. This means there’s always the ability to sell them for easy access to your cash. You can withdraw your funds at any time without facing any penalties or restrictions. This means
  4. Diversification: Investing in a Fidelity government money market fund means diversifying your cash holdings. Fidelity funds will invest in a wide range of different government securities, spreading the risk and reducing the impact of any single investment.
  5. Convenience: Fidelity offers online access to their government money market funds, making it easy to manage your cash holdings alongside your other investments. If you use Fidelity to trade stocks or other investments, you can manage all your investments in a single dashboard. Many are using their Fidelity account as an alternative to their savings account.

It’s important to note that while government money market funds are generally considered low-risk investments, they are not 100% risk-free. While your bank and savings accounts are covered by the FDIC under deposit insurance, the securities in a Fidelity government money market funds do not have the same insurance. However, Treasury bills and other U.S. Treasury securities are directly backed by the U.S. government, which is as safe as an assurance you can get.

A money market fund is also a great introduction to income investing, a strategy to take advantage of generating income from your cash through investing. 

Are Government Money Market Funds from Fidelity Safe?

Fidelity government money market funds are amongst the safest investments available in the market today. While these funds are not FDIC insured, they are required by the SEC to invest in short-term, liquid, and low-risk securities like U.S. Treasuries. U.S. Treasuries are considered as safe if not more safe than FDIC-insured deposits.

Fidelity money market funds are used by millions of investors worldwide with over $1 trillion managed.

Should You Buy Fidelity Government Money Market Funds Or Other Money Market Funds?

If you are new to money market funds and want something extremely safe and stable that also earns you income, government money market funds from Fidelity are a good bet.

Compared to other types of money market funds such as prime money market funds and municipal money market funds, government money market funds are required to invest in some of the safest and most stable assets in the world. 

If you’d like to look at other funds that generate higher yields, Fidelity also offers prime money market funds (such as FZDXX, Fidelity Money Market Fund) and municipal money market funds (such as FABXX, Fidelity California Municipal Money Market Fund) that will invest in other securities such as corporate debt or state debt. 

All things being said, most money market funds from Fidelity are generally a very safe investment.

What Other Investments Should I Consider from Fidelity?

Depending on your appetite for liquidity and how hands-on you want to be, you can consider other investments from Fidelity such as brokered CDs or Treasury bills.

Some brokered CDs on Fidelity may pay more than money market funds but require holding them to maturity. While you can sell these CDs before maturity, the market on Fidelity isn’t very liquid and you might not get your desired price.

You can also purchase Treasury bills on Fidelity directly instead of buying a money market fund. Pay attention to things like when new auction sales from the U.S. Treasury occur, when your T-Bills mature, and how to build a T-Bill ladder.