Anybody Try Auto Roll at Fidelity?

[sengsational]

The cash account at Fidelity is paying about 0.5% annually, whereas the short treasuries are about 1.3% or so, I think.

If there existed a retiree that had about $50K in the Fidelity money market, would it be worth buying t bills? A back of the envelope calculation suggests it would net $400 in additional interest. None of the $50K is expected to be accessed in the next 12 months, but flexibility is key.

Being exposed to this quandary, I found the Fidelity "Auto Roll" program, which looks like it would be a hands-off method to keep invested in short treasuries. But I didn't get far enough into it to understand the commissions, but I thought I heard that if you buy at auction, it's commission-free.

Has anyone done this? Any "gotchas" to think about? I thought that maybe a simple ladder could be created that had something maturing every month or two. You give up a little flexibility, but pick up a bit more interest.

EDIT: the 0.5%, above, is wrong. It's closer to 1.0%. I had mistakenly looked at "EY" (expected yield) instead of the 7 day.

 

[OldShooter]

I don't know about Fido, but at Schwab when I buy t-bills on the auction their posted fee seems to be $25, but the bond guy usually says "I'll waive the fee." If I were a Schwab stockholder this wouldn't make any sense to me but since I'm not, I'm a happy guy.

Doing the deal is as easy as picking up the phone. Near maturity I get a reminder letter from Schwab and a couple of days later the bond desk calls to ask if I'd like to roll the money over. AFIK this is not a special program, just the normal way they do these things. I would imagine that Fido does or will do more or less the same thing.

Other than cash, there's probably nothing more liquid than t-bills. So I don't worry about having to cash them early if, for example, the market takes s 20% hit and I want to start buying. CDs, OTOH, aren't as liquid.

 

[FIRE'd@51]

SPAXX is a government money market fund that currently yields 1.02% and is used as the settlement/sweep account in my brokerage account. If you have 50K, you could use FZDXX, which is their premium money market fund that yields 1.44%. That is where I keep funds I don't need for settlement issues. Fidelity will automatically roll money from FZDXX to SPAXX if it is needed for purchasing securities, margin, etc. I have to manually roll it back to FZDXX (by buying FZDXX) if it isn't needed in the settlement account.

I have never bought Treasury's at Fidelity but have at Vanguard, and there is no commission for buying at auctions. There is a commission if you sell before maturity. I would imagine Fidelity would be the same.

 

[audreyh1]

The cash account at Fidelity is paying about 0.5% annually, whereas the short treasuries are about 1.3% or so, I think.

If there existed a retiree that had about $50K in the Fidelity money market, would it be worth buying t bills? A back of the envelope calculation suggests it would net $400 in additional interest. None of the $50K is expected to be accessed in the next 12 months, but flexibility is key.

Being exposed to this quandary, I found the Fidelity "Auto Roll" program, which looks like it would be a hands-off method to keep invested in short treasuries. But I didn't get far enough into it to understand the commissions, but I thought I heard that if you buy at auction, it's commission-free.

Has anyone done this? Any "gotchas" to think about? I thought that maybe a simple ladder could be created that had something maturing every month or two. You give up a little flexibility, but pick up a bit more interest.

Interesting!

Currently as dividends and distributions come in I just transfer extra cash to my Synchrony Bank high yield savings which is currently paying 1.55%. Transfers take a day. Easy peasy.

 

[sengsational]

SPAXX is a government money market fund that currently yields 1.02% .... FZDXX, which is their premium money market fund that yields 1.44%.

Thanks for the info. My numbers in the OP were not very good! I looked at the Fidelity statement for SPAXX. I picked up the Expected Yield (it was 0.5%) to do my calculations. Checking after seeing your post, I see that the 7 day yield in January was listed at 0.98%. That makes it less beneficial to fiddle with treasuries.

Doesn't it look like it's about 1/3% between SPAXX and owning 4 week treasuries directly?

 

[FIRE'd@51]

Doesn't it look like it's about 1/3% between SPAXX and owning 4 week treasuries directly?

More like 1/2% at this week's auction

https://www.treasurydirect.gov/instit/annceresult/annceresult.htm

 

[audreyh1]

BTW I think the 4 week T-bill jumped back up to 1.5% today.

 

[nwsteve]

Timely post, just had this very convo with our Fido PC rep yesterday. He confirmed it was an appropriate strategy. Fidelity has some very helpful guidance on buying govt bonds on their website. Short T-Bills are offered monthly.
FWIW, I picked up 6 mon zeros to provide 1.8+%. There is no commission on new issues, and if you sell before maturity, commission is $1/bond.
Personally, I plan to park about half of our cash in Shorts over next 3-6 month. Certainly are beating any 6 mon cd's which will cost most of your interest if you had to sell before maturity.

 

[Corporateburnout]

If you have 50K, you could use FZDXX, which is their premium money market fund that yields 1.44%.

I think you need 100K minimum for their premium money market fund.

 

[FIRE'd@51]

I think you need 100K minimum for their premium money market fund.

It's only 10K for an IRA account, which is what I have at Fidelity for options trading.

 

[MikeinMD]

I use the auto roll feature at Fidelity to purchase a new CD every 3 months. The CD currently pays about 1.5%. If I remember correctly, I manually purchased the first 3 month CD and then enrolled in the auto roll feature to have it purchase a similar CD thereafter. It works great so far.

 

[upset264]

T-Bills bought at auction thru Fidelity are commission free. I recently bought a six month at 1.826%. And they're easy to sell if you need to.

 

[audreyh1]

Well I can certainly see how this would be attractive in an IRA where moving money across financial institutions is prohibitive.

 

[Corporateburnout]

It's only 10K for an IRA account, which is what I have at Fidelity for options trading.

Is this for options trading only? I have 40K in my IRA in SPAXX and when I attempt to change the core position the premium fund is not an option.

 

[audreyh1]

Is this for options trading only? I have 40K in my IRA in SPAXX and when I attempt to change the core position the premium fund is not a option.

You won’t be able to change your core position to it. You’ll have to buy it from your core fund. Extra step.

The initial 10K minimum applies to any IRA according to Fidelity. https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/31617H805

 

[sengsational]

I use the auto roll feature at Fidelity to purchase a new CD every 3 months. The CD currently pays about 1.5%. If I remember correctly, I manually purchased the first 3 month CD and then enrolled in the auto roll feature to have it purchase a similar CD thereafter. It works great so far.

That's very close to the idea I was going to suggest for the parked 50K. Except I was thinking treasuries rather than CDs. Any reason you went with CDs over treasuries?

 

[MikeinMD]

I'm not as familiar with purchasing treasuries, I was interested in 3 month duration, no purchase fees and auto roll, CDs have those features, not sure about treasuries.

 

[audreyh1]

I'm not as familiar with purchasing treasuries, I was interested in 3 month duration, no purchase fees and auto roll, CDs have those features, not sure about treasuries.

T-bill 13 weeks = 3 months since 52 weeks /4 is 13. And Treasuries are included in the Fidelity Auto Roll program.

Eligible positions
Only Treasury auction securities, new-issue CDs with a term to maturity of 5 years or less, and certain CD strategies are eligible for this service. Treasury inflation-protected securities (TIPs), inflation-protected CDs (CDIPs or IFCDs), callable CDs, floating and adjustable rate CDs, and CD purchases exceeding $250,000 are all ineligible, as are all other fixed income instruments and all secondary Treasury or CD securities.

Auto Roll benefits
This service tracks the maturity dates of Treasuries and CDs and automatically keeps you invested according to the terms of the Auto Roll Service Agreement, when initial investments mature. While it helps you stay invested in Treasuries or CDs based on your criteria, you still need to pay attention to the Auto Roll alerts so you can take appropriate action if necessary.

 

[Corporateburnout]

You won’t be able to change your core position to it. You’ll have to buy it from your core fund. Extra step.

The initial 10K minimum applies to any IRA according to Fidelity. https://fundresearch.fidelity.com/mutual-funds/fees-and-prices/31617H805

Thanks