FZDXX at Fidelity 7 day yield 1.81

[Disappointed]

Met with an adviser at Fido yesterday going over my Portfolios. He suggested that I shift my money market account where I parked some of my money to FZDXX which yield 1.81%. Has anybody own this fund?

 

[fosterscik]

I have a good sum parked in VMMXX, vanguard's equivalent money market fund. VMMXX is currently yielding 1.85% and the payout rate has been steadily increasing as interest rates in general go up. I expect FZDXX will continue to increase also. I am not concerned by the lack of any FDIC insurance and have no immediate plans to transfer the money to anything else, although short term bond funds like VFSUX are also heavily used by me (3.09% yield; but with some principal risk).

 

[njhowie]

The fund page indicates that current 7-day yield is 1.8%, however, there is currently a fee waiver in effect, which could be terminated at any time. Without the fee waiver, the yield would be 1.7%. Still nothing wrong with that, however, it is worth keeping in mind.

Aside from that, a money market fund is a money market fund. Whether you choose this one or some other which Fidelity has, really no difference, so you should go for the higher yield.

7-Day Yield
1.80%
4/30/2018

7-Day Yield Without Reductions
1.70%
4/30/2018

 

[COcheesehead]

I have it. For short term funds, its great.

 

[Freedom56]

Met with an adviser at Fido yesterday going over my Portfolios. He suggested that I shift my money market account where I parked some of my money to FZDXX which yield 1.81%. Has anybody own this fund?

I have about $703K parked in this fund now in my Fidelity IRA waiting for the right fixed income bargains to pop up. The vast majority of my IRA is still invested in individual corporate bonds and notes.

 

[Disappointed]

Thanks all.

Freedom, what corporate bonds and notes do you hold in your IRA? I am trying to do the same, creating an income portfolio. The adviser said that my portfolios are too aggressive for my age.

 

[nwsteve]

FZDXX requires $100k min balance, as an option look at SPRXX with a $2500 min balance and a 7 day yield of only slightly less at 1.68.

 

[Freedom56]

Thanks all.

Freedom, what corporate bonds and notes do you hold in your IRA? I am trying to do the same, creating an income portfolio. The adviser said that my portfolios are too aggressive for my age.

In addition to FZDXX, I'm holding the following in my Roll-over IRA at Fidelity. I don't intend to withdraw from my IRA until age 70 1/2 (about 12 years from now). I buy at or below par and hold to maturity unless I suspect that the company is in trouble and I want to exit or I bought a security well below par where the capital appreciation covers most of my interest payments to maturity. I have similar holdings in my taxable accounts at TD Ameritrade and Schwab. We are close to rate inversion and I expect continued sell-off in investment grade passive bond funds as their yields are too low versus other options (CDs, treasury notes, etc...) This is already creating some better prices at the expense of passive bond fund holders who are mostly underwater this year. I sold a lot of preferred stocks and baby bonds in my IRA and taxable accounts back in December that has raised my cash levels in all accounts.

Investment Grade:

BANK AMER CORP 6.750 08/15/2019
CUSIP 06050WBN4

CITIGROUP INC 6.875 06/01/2025 CUSIP 172967AM3

GENERAL ELEC CAP CORP 5.600 02/15/2022
CUSIP 36966R5R3

PFIZER INC 5.800 08/12/2023
CUSIP 717081DS9

CAPITAL ONE BK 8.800 07/15/2019
CUSIP 140420MV9

BARCLAYS BK PLC 6.000 07/01/2019
CUSIP 06738JEA8

High Yield:

CENTURYLINK INC 7.500 04/01/2024
CUSIP 156700BA3

U S WEST CAP FDG INC 6.875 07/15/2028
CUSIP 912912AQ5

QWEST CAP FDG INC 7.750 02/15/2031
CUSIP 74913EAJ9

 

[COcheesehead]

Thanks all.

Freedom, what corporate bonds and notes do you hold in your IRA? I am trying to do the same, creating an income portfolio. The adviser said that my portfolios are too aggressive for my age.

I use a bond ladder of corporates in my IRA, but I also supplement that with two funds that would be a little harder to create in a ladder. One is SPFPX and the other is ARTFX. All show positive gains YTD and yield between 4.63% and 5.75% respectively.

 

[Disappointed]

Thanks all. This is getting more interesting.

 

[Disappointed]

Freedom and COcheese, how did you decide which bond to buy? I own some CA Munis but have never invested in other type of bonds or preferred before.

 

[COcheesehead]

Freedom and COcheese, how did you decide which bond to buy? I own some CA Munis but have never invested in other type of bonds or preferred before.

I use the tools that Fidelity provides. They make it easy to build a ladder. You search duration, quality, yield, etc. I try and stay on the quality side and for the most part out about 6 years. I have an exception or two based on finding some nice yields about 9 years out, but those are exceptions. Fidelity gives you third party pricing so you can make sure you are not overpaying. They also provide cash flow tools so you get a very clear picture of what the ladder yields, when you'll be paid and when things will mature.

 

[catotx]

FZDXX requires $100k min balance, as an option look at SPRXX with a $2500 min balance and a 7 day yield of only slightly less at 1.68.

Coincidentally, I was looking at this fund today. It requires a minimum of $100k to start, then the required minimum drops to $10k.

I see the advantage of holding this in Fidelity's cash management account. You can keep all your money in this fund, and it gets redeemed automatically to pay for bills and expenses in the cash management account when needed. In effect, you have a checking account that pays 1.8%.

The only negative is that if you make a deposit to the CMA, you have to manually purchase the fund -- money does not get automatically swept into this fund.

 

[Huston55]

Coincidentally, I was looking at this fund today. It requires a minimum of $100k to start, then the required minimum drops to $10k.

I see the advantage of holding this in Fidelity's cash management account. You can keep all your money in this fund, and it gets redeemed automatically to pay for bills and expenses in the cash management account when needed. In effect, you have a checking account that pays 1.8%.

The only negative is that if you make a deposit to the CMA, you have to manually purchase the fund -- money does not get automatically swept into this fund.

Exactly what we’ve done for ~2yrs with our Fido checking account. Started with balance >$100k, now ~$30k, and auto redeemed into Core account to pay bills.

 

[COcheesehead]

Coincidentally, I was looking at this fund today. It requires a minimum of $100k to start, then the required minimum drops to $10k.

I see the advantage of holding this in Fidelity's cash management account. You can keep all your money in this fund, and it gets redeemed automatically to pay for bills and expenses in the cash management account when needed. In effect, you have a checking account that pays 1.8%.

The only negative is that if you make a deposit to the CMA, you have to manually purchase the fund -- money does not get automatically swept into this fund.

You are correct. You have to "buy" it. Its not a sweep.

 

[Freedom56]

Freedom and COcheese, how did you decide which bond to buy? I own some CA Munis but have never invested in other type of bonds or preferred before.

This should be discussed in a thread for bond investing but I will try to answer your question on how I select my bonds. My investment strategy is preservation of capital. I do take some risk, but I invest with with my "eyes wide open". I avoid sectors such as mining, energy, commercial real estate, and retail. I have attached screenshots from Fidelity for the examples. Nearly identical screens are available from TD Ameritrade and Charles Schwab. THIS IS JUST AN EXAMPLE.

Step 1 (ref: Yield Table):
Start with the fixed income yield table. Note brokers don't show high yield corporate bonds/notes (BA1/BB+ and lower) in their yield table. Always compare corporate bonds with CDs and Treasuries of the same term. The yield curve today shows us that there is no point going beyond 3-5 year terms and CDs are offering better yields considering risk/reward than high investment grade corporate notes and treasuries. Therefore you are better off buying a 3 or 5 year CD than a AAA rated corporate bond/note of the same term. This means that the high investment grade corporate notes/bonds are overpriced relative to their risk. In this example, I selected lower investment grade 5 year corporate notes (circled in red) to see what Fidelity has in inventory.

Step 2 (ref: 5 year corporate search results):
The results show the company, coupon rate (what it pays), maturity date, rating, bid/ask price, bid/ask yield, YTW, YTM, and link to recent trades to ensure that your are not overpaying for the bond/note. Note that the yield is higher than the coupon because the note is trading at a discount in the example circled. At maturity it will be redeemed at full par.

Step 3 (ref: ARES Capital summary):
If we select the 4th entry (ARES CAP CORP NOTE), a summary of the note is presented with the terms of payment and any research on the security. Review the ratings reports from S&P or Moody's for additional information on risk.

Step 4 (ref Ares stock snapshot)
I usually look at the underlying company information provided by the stock research to determine if the company is profitable, what are the earnings trends, what is the interest coverage ratio. Keep in mind, companies are contractually obligated to pay interest on debt but not contractually obligated to pay dividends. You should avoid companies that burn through their cash. I also look at recent news and SEC filings to ensure that I'm not considering a company with accounting problems or worse.

If everything checks out and I'm happy with the yield and term, then I'll buy otherwise I'll move on. Hope this helps.

 

[Dtail]

This should be discussed in a thread for bond investing but I will try to answer your question on how I select my bonds. My investment strategy is preservation of capital. I do take some risk, but I invest with with my "eyes wide open". I avoid sectors such as mining, energy, commercial real estate, and retail. I have attached screenshots from Fidelity for the examples. Nearly identical screens are available from TD Ameritrade and Charles Schwab. THIS IS JUST AN EXAMPLE.

Step 1 (ref: Yield Table):
Start with the fixed income yield table. Note brokers don't show high yield corporate bonds/notes (BA1/BB+ and lower) in their yield table. Always compare corporate bonds with CDs and Treasuries of the same term. The yield curve today shows us that there is no point going beyond 3-5 year terms and CDs are offering better yields considering risk/reward than high investment grade corporate notes and treasuries. Therefore you are better off buying a 3 or 5 year CD than a AAA rated corporate bond/note of the same term. This means that the high investment grade corporate notes/bonds are overpriced relative to their risk. In this example, I selected lower investment grade 5 year corporate notes (circled in red) to see what Fidelity has in inventory.

Step 2 (ref: 5 year corporate search results):
The results show the company, coupon rate (what it pays), maturity date, rating, bid/ask price, bid/ask yield, YTW, YTM, and link to recent trades to ensure that your are not overpaying for the bond/note. Note that the yield is higher than the coupon because the note is trading at a discount in the example circled. At maturity it will be redeemed at full par.

Step 3 (ref: ARES Capital summary):
If we select the 4th entry (ARES CAP CORP NOTE), a summary of the note is presented with the terms of payment and any research on the security. Review the ratings reports from S&P or Moody's for additional information on risk.

Step 4 (ref Ares stock snapshot)
I usually look at the underlying company information provided by the stock research to determine if the company is profitable, what are the earnings trends, what is the interest coverage ratio. Keep in mind, companies are contractually obligated to pay interest on debt but not contractually obligated to pay dividends. You should avoid companies that burn through their cash. I also look at recent news and SEC filings to ensure that I'm not considering a company with accounting problems or worse.

If everything checks out and I'm happy with the yield and term, then I'll buy otherwise I'll move on. Hope this helps.

Very helpful as I have Fidelity and haven't ventured into this area yet.
So my question is if one holds individual bonds to maturity, why would one have a bond fund as an alternative, unless it is just for liquidity in a rising interest rate environment?

 

[COcheesehead]

Very helpful as I have Fidelity and haven't ventured into this area yet.
So my question is if one holds individual bonds to maturity, why would one have a bond fund as an alternative, unless it is just for liquidity in a rising interest rate environment?

Hard to ladder certain types of bonds like floating rate, though a nice performer in a rising rate environment so a fund is appropriate.

 

[Dtail]

Hard to ladder certain types of bonds like floating rate, though a nice performer in a rising rate environment so a fund is appropriate.

Okay thanks. One good angle. Feel very comfortable with my stock allocation and %, but still experimenting with the bond type side.