If you have a Fidelity brokerage or retirement account, their money market funds are a simple way to earn higher and low-risk cash returns while staying liquid. Fidelity money market funds offer higher yields than savings accounts, are treated as cash, and are extremely safe options to park our cash. In this article, we’ll review the different money market fund options on Fidelity and each fund in more detail.
What Are Fidelity Money Market Funds?
One of the most popular places to park cash on Fidelity is its money market funds, which managers over $1 trillion in deposits. Money market funds are meant to conserve cash and generate low-risk returns. Fidelity categorizes its money market funds into three categories: government, prime, and municipal.
- Government money market funds are Fidelity funds that hold U.S. government securities, such as Treasury bills, and other extremely high-quality debt that’s backed by U.S. government securities.
- Prime money market funds are slightly more risky. In addition to U.S. government debt, prime money market funds hold short-term debt issued by companies and banks. In exchange for the increase in risk, prime money market funds historically offer higher yields than government money market funds.
- Municipal money market funds aim to generate interest income that’s exempt from federal income tax by investing at least 80% of its assets in municipal securities. Fidelity also offers state-specific municipal funds to take advantage of any tax exemption depending on where you live.
We pay the most attention to Fidelity’s government and prime money market funds since they offer much higher yields and better flexibility than municipal funds.
Main Reasons to Consider Fidelity Money Market Funds
Money market funds offer three major benefits: liquidity, high yields, and stability. A traditional savings account might offer some yield and stability, but no liquidity. If you invest in stocks, you might get higher returns and similar liquidity, but no stability.
Money market funds aim to deliver a balance of all three:
- Liquidity: Fidelity money market funds act as cash. If you are invested in a Fidelity money market fund, Fidelity allows you to sweep out of the fund instantly. With a Fidelity money market fund, you always have immediate access to cash. Fidelity money market funds instantly settle (T+0), unlike other mutual funds which settle in one day (T+1), and ETFs, which settle in two days (T+2). There are also no silly early withdrawal penalties or holding restrictions like with bank CDs and savings accounts.
- Higher Yields: Money market funds almost always offer the potential for higher yields than the products from your bank. The lowest yield on a Fidelity money market fund is currently 5%. Meanwhile, Chase Bank is paying you 0.01% for your savings account, or 2% for their CDs. Fidelity money market fund rates adjust in real-time, so you’ll always get the most competitive rates, which the bank isn’t incentivized to provide you.
- Stability & safety: Fidelity money market funds only invest in short-term, low-risk investments. They’re much less prone to market fluctuations than other investments.
Fidelity Liquidity and Core Positions
As mentioned above, all Fidelity money market funds are treated as cash. You can automatically “sweep out” of any Fidelity money market fund position to access cash immediately or to buy another investment. Fidelity will liquidate the amount you need from your Fidelity money market fund and provide you with the necessary money.
In addition, Fidelity has a feature called “core positions”, which is where Fidelity will “sweep in” your uninvested cash. In simple terms, whatever cash you have idling will automatically be used to enter a core position. There are limited choices for a core position, which is almost always a Fidelity money market fund.
Your core position options depend on your account type. For regular brokerage accounts, the default core position is SPAXX (Fidelity Government Money Market Fund), but you can also choose the FCASH (Fidelity Cash) and FZFXX (Fidelity Treasury Money Market Fund). For retirement accounts and HSAs, you can choose either SPAXX or FDRXX (Fidelity Government Cash Reserves).
Fidelity Money Market Fund Have Higher Yields
Fidelity money market fund rates are historically much higher than your bank savings rate. The lowest annual yield on a Fidelity money market fund is currently around 5%.
The most popular Fidelity money market funds have no minimum investment. Fidelity has versions of its funds with higher yields that target institutions and high-net-worth individuals with a minimum investment starting at $100,000.
There are five Fidelity government and prime money market funds with no minimum investment:
- SPAXX (Fidelity Government Money Market Fund)
- FDRXX (Fidelity Government Cash Reserves)
- FZFXX (Fidelity Treasury Money Market Fund)
- FDLXX (Fidelity Treasury Only Money Market Fund)
- SPRXX (Fidelity Money Market Fund)
The first four are government funds, and the last is a prime money market fund.
- SPAXX (Fidelity Government Money Market Fund) primarily invests in cash, U.S. government securities, and repurchase agreements collateralized by cash or U.S. government securities. It’s the default and most popular Fidelity core position. The current SPAXX yield is 4.99%.
- FDRXX (Fidelity Government Cash Reserves) is a core position option for retirement accounts and HSAs. It has a lower expense ratio but holds the same type of assets. The current FDRXX yield is 4.99%.
- FZFXX (Fidelity Treasury Money Market Fund) is nearly identical to SPAXX and has a yield of 4.99%. FZFXX is less popular than SPAXX since SPAXX is the default core position and FZFXX is not.
- FDLXX (Fidelity Treasury Only Money Market Fund) exclusively invests in U.S. Treasuries. As a result, it’s the safest money market fund, and all its returns are exempt from state and local taxes. If you lived in California, you’d save up to 13% on your returns. FDLXX currently has a yield of 5.00%. It cannot be used as a core position.
- SPRXX (Fidelity Money Market Fund) is a prime money market fund and offers a higher yield than the government money market funds mentioned above. It invests in “riskier” securities such as commercial debt and certificates of deposit. However, it’s still considered extremely safe and yields 5.08% annually. It cannot be used as a core position.
Our opinion with money market funds is to keep things simple and take advantage of Fidelity’s core position feature, which lets you sweep in and out automatically.
The default core position for any Fidelity account is SPAXX. In most cases, we think it’s good enough. If you have a retirement account, FDRXX historically offers a slightly higher yield than SPAXX. If you truly want the highest yield and are willing to manually buy and sell a fund, then SPRXX is the best choice for you.
Regardless, Fidelity money market funds will crush whatever you’re getting from a bank. Chase Savings offers a flat 0.01% interest rate for its customers. Banks want to keep the returns for themselves, not you!
Fidelity Money Market Funds Offer Stability and Safety
Fidelity money market funds are generally very safe. Because federal regulations require money market funds to hold short-term, low-risk, highly liquid investments, these funds are very stable investments.
Money market funds primarily invest in instruments such as U.S. treasuries. U.S. treasuries are backed by the U.S. government, which means the U.S. government guarantees they’ll repay your original investment and interest payment. This makes these investments, which represent a significant part of Fidelity’s market funds, virtually risk-free investments.
It’s important to note that Fidelity money market funds are investment products, so they are not FDIC-insured.
There is additional security in Fidelity brokerage accounts, which are covered by the Securities Investor Protection Corporation (SIPC). The SIPC will cover up to $500,000 in securities, which includes money market funds, including a $250,000 limit for cash held in a brokerage account.
Tax Advantages of Fidelity Money Market Funds
While all income from money market funds is taxed at the federal level, certain Fidelity money market funds have state tax benefits. This mainly comes down to the proportion of U.S. Treasury bills held by that money market fund. U.S. Treasuries can be bought directly on Fidelity and are always state-tax exempt.
Here is the 2023 state tax-exemption data for Fidelity money market funds.
Are Fidelity Money Market Funds Easy To Buy and Use?
Buying and using Fidelity money market funds is straightforward.
To purchase a Fidelity mutual fund, simply navigate to the ‘Trade’ section on Fidelity.com. From there, select the account in which you want to buy the fund and click ‘Buy a mutual fund.’
Enter the mutual fund symbol and the dollar amount you wish to invest. After reviewing your order details, click ‘Place Order’ to complete the transaction.
Fidelity’s online brokerage offers a marketplace to easily sell your money market funds for any liquidity reasons, making it simple to manage and track your cash and investments.
Fidelity Money Market Fund Rates and the Different Options
Fidelity offers 18 unique money market funds. This number doesn’t include institutional money market funds and or funds that can only be held by special account types. Of the 18 money market funds we can buy, 5 funds are government money market funds, 2 are prime money market funds, and 11 are municipal money market funds.
Fidelity only offers 5 government or prime money market funds with no minimum investment. All other government and prime money market funds require a minimum investment starting at $100,000. Fidelity charges a lower expense ratio for these funds, which targets high net-worth individuals and institutions.
For the sake of comparison, we’ve put together a table of all Fidelity government and prime money market funds. You can compare Fidelity money market fund rates with this table. The first 7 funds can be bought by anyone, while the other funds target institutions and certain investors and require a much higher minimum investment.
Fidelity Money Market Funds vs. Vanguard and Schwab Funds
We like that Fidelity offers auto-sweeping through its core positions and that you can centralize all your investing on a single full-service brokerage.
Fidelity does charge higher fees compared to some of its brokerage counterparts. Vanguard is famous for having low-fee money market and mutual funds. FDLXX, Fidelity’s Treasury Only Market Fund, charges an expense ratio of 0.42%. Meanwhile, Vanguard’s equivalent is VUSXX, and it charges a very low 0.09%. This means you’ll earn a higher yield on Vanguard’s VUSXX compared to Fidelity’s FDLXX.
Vanguard also has an auto-sweep feature like Fidelity’s core positions. However, Vanguard has fewer features when it comes to general stock and bond investing.
Meanwhile, SNSXX is Schwab’s Treasury Money Fund, and it charges an expense ratio of 0.34%. As a brokerage, it’s more similar to Fidelity and more robust than Vanguard, but it doesn’t have any money market auto-sweep features like Fidelity and Vanguard.
Your choice of where to buy money market funds depends on your brokerage preference, yield maximization, and the level of automation you desire through sweep accounts. Unfortunately, there is not a best of all worlds at the moment.
Fidelity Money Market Fund Overview
Here is a comprehensive list of Fidelity money market funds categorized by type:
| Fidelity Government and U.S. Treasury Money Market | Fidelity State Municipal Money Market | Fidelity National Municipal Money Market | Fidelity Prime Money Market |
|---|---|---|---|
| Fidelity® Government Money Market Fund (SPAXX) | Fidelity® California Municipal Money Market Fund (FABXX) | Fidelity® Investments Money Market Tax Exempt - Class I (FTCXX) | Fidelity® Investments Money Market - Money Market Portfolio - Class I (FMPXX) |
| Fidelity® Government Money Market Fund - Premium Class (FZCXX) | Fidelity® California Municipal Money Market Fund - Premium Class (FSPXX) | Fidelity® Municipal Money Market Fund (FTEXX) | Fidelity® Investments Money Market - Money Market Portfolio - Institutional Class (FNSXX) |
| Fidelity® Government Cash Reserves (FDRXX) | Fidelity® California Municipal Money Market Fund - Institutional Class (FSBXX) | Fidelity® Tax-Exempt Money Market (FMOXX) | Fidelity® Money Market Fund (SPRXX) |
| Fidelity® Investments Money Market Government Portfolio - Class I (FIGXX) | Fidelity® Massachusetts Municipal Money Market Fund (FAUXX) | Fidelity® Tax-Exempt Money Market Fund - Premium Class (FZEXX) | Fidelity® Money Market Fund - Premium Class (FZDXX) |
| Fidelity® Investments Money Market Government Portfolio - Institutional Class (FRGXX) | Fidelity® Massachusetts Municipal Money Market Fund - Premium Class (FMSXX) | ||
| Fidelity® Investments Money Market Treasury Only- Class I (FSIXX) | Fidelity® Massachusetts Municipal Money Market Fund - Institutional Class (FMAXX) | ||
| Fidelity® Investments Money Market Treasury Only- Institutional Class (FRSXX) | Fidelity® New Jersey Municipal Money Market Fund (FAYXX) | ||
| Fidelity® Investments Money Market Treasury- Class I (FISXX) | Fidelity® New Jersey Municipal Money Market Fund - Premium Class (FSJXX) | ||
| Fidelity® Investments Money Market Treasury- Institutional Class (FRBXX) | Fidelity® New Jersey Municipal Money Market Fund - Institutional Class (FSKXX) | ||
| Fidelity® Treasury Money Market Fund (FZFXX) | Fidelity® New York Municipal Money Market Fund (FAWXX) | ||
| Fidelity® Treasury Only Money Market Fund (FDLXX) | Fidelity® New York Municipal Money Market Fund - Premium Class (FSNXX) | ||
| Fidelity® New York Municipal Money Market Fund - Institutional Class (FNKXX) |
Fidelity Money Market Funds vs. Other Fidelity Cash Investments
We enjoy that Fidelity money market funds are treated as cash, with automatic investment and liquidation. CDs bought on Fidelity do not have this feature but are worth checking since they may offer more competitive rates than Fidelity funds.
It’s difficult to go wrong with Fidelity’s many cash options, but the money market fund sweep feature makes Fidelity an optimal replacement for our bank. Often, we don’t even think about the cash in a Fidelity brokerage account, knowing it’ll automatically earn income.
