Fidelity Money market vs FDZXX

[steady saver]

I was just reviewing my accounts...
I have cash in my investment account that I want to have access to in the coming 6-9 months and that cash is currently in SPAXX (govt money market) with a 7 day yield of 4.97%.
I had moved some cash in another account into FDZXX for a slightly higher yield of 5.15%.
Can you see any reason why I shouldn't move a chunk of money into FDZXX in my individual investment account? Am I missing something?

Thanks in advance...

 

[RetiredHappy]

I was just reviewing my accounts...
I have cash in my investment account that I want to have access to in the coming 6-9 months and that cash is currently in SPAXX (govt money market) with a 7 day yield of 4.97%.
I had moved some cash in another account into FDZXX for a slightly higher yield of 5.15%.
Can you see any reason why I shouldn't move a chunk of money into FDZXX in my individual investment account? Am I missing something?

Thanks in advance...

As long as you can meet the minimum.

 

[PlayinwithFIRE]

They work the same as far as I'm concerned. Getting over the $100K hump to begin with is
the issue for most.

One thing I was wondering about lately and cant seem to find an easy way to get at the info...if US drops its interest rates, we expect the MMs to follow suit. Does that happen in lock step with FED rates, or is there some delay?

Is there any difference expected in the rate change for different MM's?

pwf

 

[Dtail]

There is the 100k minimum to start, but you don't have to keep it at 100k.

 

[Another Reader]

I look for yields starting with a 5. Buying CD's at 5.15 to 5.2. MM accounts are dropping... FZFXX and FDLXX are at 4.93 now. FZDXX at 5.15, with a little more risk.

 

[xlf11]

Initial minimum $ for FDZXX is different for different account types: Individual/HSA =$100k; IRA/401k =$10k.

 

[steady saver]

Thanks all, yes am aware of the 100K minimum. This is on funds that are my version of bonds, ha, in terms of balancing out the equity portion...will be using some for home remodel. It was just occurring to me that a .18% difference was a chunk of change. I don't want it tied up in a CD at this point.

 

[freedomatlast]

If you're concerned about tenths of a percent, you might as well move it to VMRXX at 5.28%

 

[mrfeh]

If you have state income taxes, take the percentage of government obligations for each fund into account.

 

[big-papa]

There is the 100k minimum to start, but you don't have to keep it at 100k.

Yep - I know of at least one person who was making some other changes to their portfolio and passed the money through this MM fund and then back out a short while later.

Cheers

 

[big-papa]

I've been using ultrashort bond funds for this purpose. Plenty to choose from - just know that they don't act the same way as MM funds do.

Cheers

 

[teej1985]

I've been using ultrashort bond funds for this purpose. Plenty to choose from - just know that they don't act the same way as MM funds do.

Cheers

Why have you used ultra short bond funds?

 

[mrfeh]

One thing I was wondering about lately and cant seem to find an easy way to get at the info...if US drops its interest rates, we expect the MMs to follow suit. Does that happen in lock step with FED rates, or is there some delay?

They will change in lock step, more or less.

Assuming rates do come down over the next couple years, this golden age of money market funds will be coming to an end...

 

[big-papa]

Why have you used ultra short bond funds?

Higher yields are available.

 

[RetireBy90]

I look for yields starting with a 5. Buying CD's at 5.15 to 5.2. MM accounts are dropping... FZFXX and FDLXX are at 4.93 now. FZDXX at 5.15, with a little more risk.

You could look at Key Bank (KEY), currently paying a dividend of 5% and you get any cap appreciation as a bonus

 

[steady saver]

If you have state income taxes, take the percentage of government obligations for each fund into account.

No state income tax but good to keep in mind for others who do.

 

[teej1985]

Higher yields are available.

Vanguard Ultra Short Bond is 4.9% currently. I don't think that is higher than the money markets?

 

[audreyh1]

Vanguard Ultra Short Bond is 4.9% currently. I don't think that is higher than the money markets?

No, it’s not. Until the yield curve un-inverts, longer duration gets lower yield.

 

[mrfeh]

You could look at Key Bank (KEY), currently paying a dividend of 5% and you get any cap appreciation as a bonus

An equity holding is never a good idea for short term money, as is the case here.

 

[big-papa]

Vanguard Ultra Short Bond is 4.9% currently. I don't think that is higher than the money markets?

I didn't write that every Ultra Short Bond fund is higher than money markets. I wrote that higher yields are available.

Examples of ultra short bond funds with higher yields. Yields shown below are Friday's YTM yields, adjusted for e/r.
ICSH: 5.246% (I've been holding this one for a while now)
FLOT: 5.841%
TFLO 5.312%
There are others.

Cheers.

 

[big-papa]

No, it’s not. Until the yield curve un-inverts, longer duration gets lower yield.

See other response.
And of course when the yield curve un-inverts things will be different. I don't hold cash for long term usage - I try and match, best as I can, duration of my fixed income to investment horizon for its usage.

Cheers.

 

[mrfeh]

I didn't write that every Ultra Short Bond fund is higher than money markets. I wrote that higher yields are available.

Examples of ultra short bond funds with higher yields. Yields shown below are Friday's YTM yields, adjusted for e/r.
ICSH: 5.246% (I've been holding this one for a while now)
FLOT: 5.841%
TFLO 5.312%
There are others.

Cheers.

I wouldn't refer to these as ultra-short bond funds; I would call them floating rate (aka bank loan) funds.

They carry different risks than bond funds.

 

[big-papa]

I wouldn't refer to these as ultra-short bond funds; I would call them floating rate (aka bank loan) funds.

They carry different risks than bond funds.

ishares calls all 3 bond funds. But what matters is what they hold.

Since rates of the underlying holdings will reset frequently, they will definitely have different risks than fixed rate bond index funds.
These don't all hold bank loans (or instruments ultimately coupled to bank loans) by the way.
-TFLO is an index fund that only holds floating rate treasury notes.
- ICSH is an active fund that holds a mix of everything and floating rate instruments are among the mix, but so are money markets and CDs.
- FLOT is an index fund that holds all manner of floating rate instruments as well, but is tied to an index.

As far as risk is concerned, you can backtest some of this over on portfoliovisualizer. Biggest risk I saw is with FLOT, which despite its current higher yield is why I've stayed away from it. Much higher volatility than alternative choices with some large blips over the last few years.

At the end of the day, there are choices for short term fixed income instruments and each choice comes with different risks and behaviors.

Cheers.

 

[JJpop]

I look for yields starting with a 5. Buying CD's at 5.15 to 5.2. MM accounts are dropping... FZFXX and FDLXX are at 4.93 now. FZDXX at 5.15, with a little more risk.

Good luck finding them now.