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Participant ○○○

Re: SPAXX vs FZDXX


@yogibearbull wrote:

Scott Black, Delphi, had a warning in Barron's this week to use only Treasuries-m-mkt funds for cash as there may be defaults in commercial paper used in retail prime m-mkt funds. New rules went into effect in 2016 and have yet to be tested.

That warning may be extreme, but don't use retail prime m-mkt funds for checking or for emergency use. Use government m-mkt funds for those.

 


YBB,

Now with interest rates at zero, what are your thoughts regarding the safety of a fund such as Vanguard Municipal Money Market VMSXX?

Hootz

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Frequent Contributor

Re: SPAXX vs FZDXX


@yogibearbull wrote:

Scott Black, Delphi, had a warning in Barron's this week to use only Treasuries-m-mkt funds for cash as there may be defaults in commercial paper used in retail prime m-mkt funds. New rules went into effect in 2016 and have yet to be tested.

That warning may be extreme, but don't use retail prime m-mkt funds for checking or for emergency use. Use government m-mkt funds for those.

 


Questions for @yogibearbull: As far as I know, only Treasuries are backed by the full faith and credit of the US government. Do you know whether or not that also applies to notes issued by Fannie Mae and Freddie Mac? Are those not frequently found in the portfolios of "government" MM funds?

In terms of safety, should one be aware or make a distinction between "Treasury Only" MM funds and "government" MM funds?

Thanks,

Fred

 

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Follower ○○

Re: SPAXX vs FZDXX

I spoke to a Fido rep this morning and here is the information I received regarding FZDXX

1) The value would not go below $1

2) At this point, FZDXX could have some significant interest rate risk.  Even if rates were to go negative, you would not lose any money since the value would not go below $1

3) The expense ratio would phase out if rates drop even lower.

4) The 7 day yield is updated daily 

5) If markets were to shut down, they believe you would still be able to transfer money from FZDXX to a location outside of Fidelity.

I still plan on transferring a portion of my balance to my online savings account/no penalty CD

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Explorer ○○

Re: SPAXX vs FZDXX

Just Fyi...Ask, What If? Any MM fund drops below $1.00/Per share Price...' Broke the Buck'
A Large Money Market Fund Breaks the Buck 
What does this mean for your money market investment?             

https://www.morningstar.com/articles/253485/a-large-money-market-fund-breaks-the-buck

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Follower ○○

Re: SPAXX vs FZDXX

I was specifically asking about FZDXX and the gentleman I spoke with said it would not go below $1.  With that said, I just transferred a significant portion to my on-line savings account where I will set up a no-penalty CD

HondaMan

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Explorer ○○

Re: SPAXX vs FZDXX

HondaMan,
You mentioned..."I just transferred a significant portion to my on-line savings account where I will set up a no-penalty CD"
Is that within directly Fidelity a/c to CD outside & without penalty?
or it's Outside Fidelity account with FZDXX?

Fed Reserve also lowered rate again Last Night /Sunday? It's getting close to Zero or US can Go Negative rate & that can mean disaster to FZDXX & many more MM Funds! Isn't it?
While It hasn't happened even in 2008.
https://www.fidelity.com/news/article/top-news/202003152055RTRSNEWSCOMBINED_KBN21302U-OUSBS_1

Btw, For what it's worth...
I had approx $500 in that TDAmeritrade TDA IRA account in Reserve MM fund before 2008.
When it "Broke the Buck", in 2008, they just Froze my access to that account.
TDA will NOT let me Sell or Cashout my Under $500 to $450 reported value or even less.
TDA just kept sent statement & Reporting a/c value every Qtrly...going down without any access...
all the way down to $200.
I couldn't withdraw for approx 4-5 years.
After a few yrs, TDA cashed out the account & sent $200 check by US Post office mail & Closed out account from that
Reserve MM funds that "Broke The Buck".

Thanks.
Majick

 

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Follower ○○

Re: SPAXX vs FZDXX

It is outside of Fidelity with Ally Bank (online).  Ally has a 1.75% 11 month no penalty CD if you put at least $25K in it (it was 1.90% a couple of days ago).  You only need to keep it in there for 6 days for the no penalty phase to kick in.  I am not going to get rich with a 1.75% annual rate but it will be better than FZDXX in the near future.

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Frequent Contributor

Re: SPAXX vs FZDXX

@HondaMan , check this in prospectus of FZDXX. Note auto-triggers.

Special Limitations Affecting Redemptions of Fidelity® Money Market Fund:

The fund may impose liquidity fees and temporarily suspend redemptions based on the amount of fund assets that are “weekly liquid assets.” Weekly liquid assets generally include cash, direct obligations of the U.S. government, certain other U.S. government or agency securities, and securities that will mature or are subject to a demand feature that is exercisable and payable within five business days.

If, at any time, the weekly liquid assets of the fund fall below 30% of total assets and the fund’s Board of Trustees determines it is in the fund’s best interests, the fund may, as early as the same day, impose a liquidity fee of no more than 2% and/or temporarily suspend redemptions for up to 10 business days in any 90 day period.

If, at the end of any business day, the weekly liquid assets of the fund fall below 10% of total assets, the fund will impose a liquidity fee of 1% on all redemptions beginning on the next business day, unless the fund’s Board of Trustees determines that imposing such a fee would not be in the fund’s best interests or determines that a lower or higher fee (not to exceed 2%) would be in the fund’s best interests. Any such fee would remain in effect until weekly liquid assets return to 30% or the fund’s Board of Trustees determines that the fee is no longer in the fund’s best interests. The Board of Trustees of the fund may determine that it would not be in the fund’s best interests to continue operating if the fund’s weekly liquid assets fall below 10% or under other circumstances, at which point, the fund may permanently suspend redemptions and liquidate.

Liquidity fees are designed to transfer the costs of liquidating fund securities from shareholders who remain in the fund to those who leave the fund during periods when liquidity is scarce. The fees are payable to the fund and any fees charged to a shareholder will fully or partially offset the gain or increase the loss realized by that shareholder upon redemption.

If liquidity fees are imposed or redemptions are suspended, the fund will notify shareholders on the fund’s website or by press release.

YBB
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Re: SPAXX vs FZDXX

Thanks Yogi, the gentleman I spoke with this morning failed to mention that unless his opinion/understanding was that they would waive any fees.  Maybe I will move more out. :)

HondaMan

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Frequent Contributor

Re: SPAXX vs FZDXX

@fred495 , you make good points on Treasuries m-mkt funds.

But IMO gov m-mkt funds are fine. 2016 m-mkt reforms sanctioned gov m-mkt funds as brokerage core/settlement funds and for other purposes that require stable $1 value with high confidence. The Fed has provided huge liquidity to m-mkt repo market. Gov doesn't want to be blamed for troubles in areas that it said were safe/safer only in 2016.

YBB
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Re: SPAXX vs FZDXX


@yogibearbull wrote:

@fred495 , you make good points on Treasuries m-mkt funds.

But IMO gov m-mkt funds are fine. 2016 m-mkt reforms sanctioned gov m-mkt funds as brokerage core/settlement funds and for other purposes that require stable $1 value with high confidence. The Fed has provided huge liquidity to m-mkt repo market. Gov doesn't want to be blamed for troubles in areas that it said were safe/safer only in 2016.


Thanks, YBB. Appreciate your reply.

Fred

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Re: SPAXX vs FZDXX

I started this thread a couple of months back asking for guidance on whether or not to move my cash from SPAXX to FZDXX. I start RMDs in 2021 and this was my safety net for RMDs in case the market went south (which it has). Anyway in trying to follow all of everyones remarks today, could you just advise me ..... do I need to sell all my FZDXX, and put it back into SPAXX?

Thanks, Jody

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Follower ○○

Re: SPAXX vs FZDXX

I started this thread a couple of months back asking for guidance on whether or not to move my cash from SPAXX to FZDXX. I start RMDs in 2021 and this was my safety net for RMDs in case the market went south (which it has). Anyway in trying to follow all of everyones remarks today, could you just advise me ..... do I need to sell all my FZDXX, and put it back into SPAXX?

Thanks, Jody

I need these funds to be available for my RMDs  in 2021, I can't have the funds frozen or unavailable as someone above mentioned happened to them.

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Re: SPAXX vs FZDXX


@jody49 wrote:

I started this thread a couple of months back asking for guidance on whether or not to move my cash from SPAXX to FZDXX. I start RMDs in 2021 and this was my safety net for RMDs in case the market went south (which it has). Anyway in trying to follow all of everyones remarks today, could you just advise me ..... do I need to sell all my FZDXX, and put it back into SPAXX?

Thanks, Jody

I need these funds to be available for my RMDs  in 2021, I can't have the funds frozen or unavailable as someone above mentioned happened to them.


The current 7 day yield (as of this morning)

SPAXX=0.92%, FZDXX=1.20%

Yields are so low and dropping, I'd go for safety. A few extra dollars isn't worth the worry.

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Re: SPAXX vs FZDXX

Meaning that SPAXX is safer than FZDXX? They are both money market funds .... or is there something safer?

Jody

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Frequent Contributor

Re: SPAXX vs FZDXX

SPAXX is gov m-mkt fund, FZDXX is retail prime m-mkt fund.

YBB
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Re: SPAXX vs FZDXX


@jody49 wrote:

Meaning that SPAXX is safer than FZDXX? They are both money market funds .... or is there something safer?

Jody


Yes, meaning SPAXX is safer. An alternative might be Fidelity's FDIC insured cash account , but I don't know offhand if that's available in retirement accounts.

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Re: SPAXX vs FZDXX


@DJANG0 wrote:

@jody49 wrote:

Meaning that SPAXX is safer than FZDXX? They are both money market funds .... or is there something safer?

Jody


Yes, meaning SPAXX is safer. An alternative might be Fidelity's FDIC insured cash account , but I don't know offhand if that's available in retirement accounts.


The last time I looked, Fidelity had a FDIC insured cash option for IRA accounts. But, the yield was lower than for SPAXX or FDLXX, their Treasury Only MM fund.

Fred

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Re: SPAXX vs FZDXX

@fred495 

You are right Fred. The FDIC insured cash account pays next to nothing. I keep a small amount there in taxable because Fido reimburses ATM fees on the associated debit card if I need cash unexpectedly when traveling.

In terms of safety, it & SPAXX should be equally safe. I mentioned it because most people know about FDIC insurance and some may find it a comfort.

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Explorer ○○

Re: SPAXX vs FZDXX

Guys,
How's FZFXX Fidelity® Treasury Money Market Fund? 
Is this Safer MM to Park cash for NOW ... than other MM Funds?
 Compare to FZDXX or  SPAXX  SPRXX 
Any Comments/Feedback.
Thanks.
Majick

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