Fidelity Money market vs FDZXX

[Purslane]

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

Can you explain? I live in a state with high tax. Is a government MM fund like SPAXX tax advantaged for me and if yes, how does it work?

Also I was reviewing the expense ratio at 0.42% for SPAXX. That is about 10x higher than some of my index funds. For $250K the way I calculate it is this:
Annual fee = .0042 x 250,000 = $1,050. Is this correct?
This seems like a high price.

 

[Hopeful]

Nothing happens. Mine has dropped below 100k numerous times without consequences. I did read on Reddit that they will close it if you drop below 10k. Never tested that out.

 

[big-papa]

what if it drops below 100k? do fees increase? do they tell you to move out of the fund (FZDXX)

Based on what at least one acquaintance has told me as well as some posts on bogleheads, no. They've been able to stay in it.

I'm sure it's all described in the prospectus.

Cheers.

 

[Dtail]

what if it drops below 100k? do fees increase? do they tell you to move out of the fund (FZDXX)

We have accounts with current balances below 10k and have not been moved out of FZDXX, plus no other extra fees.

 

[mrfeh]

Can you explain? I live in a state with high tax. Is a government MM fund like SPAXX tax advantaged for me and if yes, how does it work?

Also I was reviewing the expense ratio at 0.42% for SPAXX. That is about 10x higher than some of my index funds. For $250K the way I calculate it is this:
Annual fee = .0042 x 250,000 = $1,050. Is this correct?
This seems like a high price.

Whatever percentage of the MM fund (ie. SPAXX) dividends that are the result of government obligations is not taxed by the state. An example - you receive $1000 in dividends and 40% is due to gov obligations. Your state is only entitled to tax $600. (let us know if you live in CA, NY or CT, as the laws are different)

Regarding ER - it is taken into account in the yield; it is not a separate fee.

 

[DrRoy]

As of 1/30/25, FDZXX is paying 4.19%.

 

[big-papa]

Can you explain? I live in a state with high tax. Is a government MM fund like SPAXX tax advantaged for me and if yes, how does it work?

Also I was reviewing the expense ratio at 0.42% for SPAXX. That is about 10x higher than some of my index funds. For $250K the way I calculate it is this:
Annual fee = .0042 x 250,000 = $1,050. Is this correct?
This seems like a high price.

Yes it is high. That's why many of us at FIDO only use SPAXX as a settlement fund, keeping money there only while it's in transit to somewhere else. There are other options at Fidelity such as FZDXX if you want to invest more in a MM fund, as noted in this thread. Other possibilities include some short/ultrashort bond funds with fairly low e/r's, such as SGOV.

Cheers.

 

[big-papa]

As of 1/30/25, FDZXX is paying 4.19%.

Yep, and to complete the circle, SPAXX is paying 4.03%

Cheers.

 

[mrfeh]

Yep, and to complete the circle, SPAXX is paying 4.03%

Cheers.

One month T bills are at 4.33%. Another option is to autoroll those.

Just comes down to how many hoops one is willing to jump through in pursuit of .1 or .2 of yield. In the vast majority of cases, we aren't talking about much money at all here.

 

[teej1985]

what if it drops below 100k? do fees increase? do they tell you to move out of the fund (FZDXX)

Considering I transferred in FRSXX from Wells Trade which has a $10,000,000 minimum to buy at Fidelity - and they let me buy more - I don't think they care.

 

[audreyh1]

what if it drops below 100k? do fees increase? do they tell you to move out of the fund (FZDXX)

If it gets too low I think you’ll get a warning and have a month to increase the amount. That was buried in the prospectus somewhere. But I’ve never heard of anyone experiencing this. I usually have at least $10K

 

[Dtail]

If it gets too low I think you’ll get a warning and have a month to increase the amount. That was buried in the prospectus somewhere. But I’ve never heard of anyone experiencing this. I usually have at least $10K

Yup.
My mom had a balance in FZDXX ranging from $900 to $4500 for 5 years and there has never been any communication about it from Fidelity.

 

[audreyh1]

Yup.
My mom had a balance in FZDXX ranging from $900 to $4500 for 5 years and there has never been any communication about it from Fidelity.

Is that in an IRA because there the minimum initial buy is $10K

 

[Dtail]

Is that in an IRA because there the minimum initial buy is $10K

Actually it is a taxable account, but the initial investment was over 100k.

 

[audreyh1]

Actually it is a taxable account, but the initial investment was over 100k.

Just wondered, couldn’t remember.

 

[calmloki]

In my experience: nothing, no and no.