SPAXX vs. FZFXX, FDIC, FCASH, FDRXX – Fidelity Core Position

If you've got a Fidelity investment account, you've probably encountered several options for your “core position” for cash: SPAXX, FDIC, FCASH, FDRXX, and/or FZFXX. Is there a best option? I compare them here.

Update January 2023: When I originally wrote this post in mid-2022, all these choices were paying the same thing which was basically zero, so a comparison was pretty meaningless. Since then, interest rates have risen rapidly and drastically so now there's a bit more to talk about. We're essentially concerned with yield and fees (and subsequent yield net of fees), so the choice basically comes down to a higher yield with something like SPAXX, FDRXX, or FZFXX (3.68% in January 2023) or FDIC insurance but a lower yield with the FDIC-Insured Deposit Sweep Program (yield of 2.19%). I have updated these numbers below as well. The details below about what investment products are contained in each vehicle are still valid so I would encourage you to still read through those so that you fully understand what you're choosing.

Note that the yields and fees for these options change all the time, so the information and numbers you see on this page may be outdated by the time you see them. Be sure to do your due diligence and check for yourself.

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Fidelity Core Position Video

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Introduction – What Is the Fidelity Core Position?

Your “core position” at Fidelity simply refers to where your uninvested cash goes inside your account. For example, if you have 75% in an S&P 500 index fund like VOO and 25% uninvested cash, that 25% cash will automatically go into whatever fund or vehicle you select as your “core position.”

The core position basically acts as a wallet. When you buy something in your Fidelity account like a stock, you pay for it with money from that wallet. When you sell something, proceeds go into that wallet. The core position also facilitates transactions like check processing, electronic funds transfers, direct deposits, wire transfers, authorized credit cards, and other payments. There is no minimum balance requirement for the core position.

You have several options for how exactly that cash is held, which is why you're on this page in the first place.

First, let's get the obligatory reminder out of the way that market timing is usually more harmful than helpful, and DCA is inferior to investing a lump sum on average, so you probably shouldn't be holding much actual cash in the first place. But note that I'm not referring to something like T-bills or short-term government bonds, which are considered a “cash equivalent,” and which may be a perfectly sensible investment depending on your personal goals, time horizon, and risk tolerance. While several of these funds do indeed have allocations to T-bills, none of these options we're discussing here for the core position would be considered a dedicated T-bills fund.

By the way, here's the section and button you're looking for in your Fidelity account:

Now that that's out of the way, let's compare SPAXX, FZFXX, FDIC, FCASH, and FDRXX.

SPAXX vs. FZFXX, FDIC, FCASH, & FDRXX

So which Fidelity core position should you go with? Let's talk about 'em.

SPAXX – Fidelity Government Money Market Fund

As the name suggests, SPAXX is what's called a money market fund. This is a fund that holds ultra-short-term instruments that are considered cash equivalents – such as CDs, commercial paper, and repo agreements – in order to pay what is usually a tiny interest rate.

This type of fund usually pays a marginally higher interest rate than that of a plain ol' savings account at a bank. The tradeoff, of course, is that a money market fund is not insured.

SPAXX is specifically collateralized by government securities, and would thus be considered safer than a broader money market fund that includes corporate debt. If we look at the holdings of SPAXX, it's mostly U.S. government repurchase agreements, followed by U.S. Treasury Bills and U.S. Treasury Coupons.

We would expect a fund like this to have volatility no greater than about 3% in either direction. At the time of writing, SPAXX has a yield of 3.68% and a net expense ratio of 0.42%.

You may see SPRXX instead of SPAXX. They're both very similar and should have the same fee, but SPRXX is slightly broader in its scope of debt instruments. As such, SPRXX may pay a higher yield than SPAXX.

FDIC – FDIC-Insured Deposit Sweep Program

As the name suggests, this is simply an FDIC-insured vehicle into which cash is “swept” inside the account. FDIC stands for Federal Deposit Insurance Corporation, which is quite literally the organization that insures your cash deposits up to $250,000. This is basically a true savings account like you'd have at your regular bank. In fact, Fidelity actually spreads your deposits here among several banks; that's why it's called a “program” and is not an actual investable fund.

As such, we'd expect it to pay less than the other options on this list, but it can be considered comparatively less risky and less volatile. With this program, your cash is not exposed to any kind of market risk like with others on this list. That said, “less risky” in this context just means we're basically going from extremely safe to riskless.

As of December 2022, this FDIC cash sweep program has an interest rate of 2.19% and also a fee of 0.01%.

FCASH

FCASH is another option you'll see in your taxable brokerage account. Note that this is going to be the default option inside your account. This is a free credit balance from Fidelity that earns interest. At the time of writing, its interest rate is 2.19%.

FDRXX – Fidelity Government Cash Reserves

Like SPAXX, FDRXX is another U.S. government money market fund. For all intents and purposes, it is basically an older version of SPAXX. Their holdings are nearly identical and they have the same yield and the same historical returns.

FDRXX launched in 1979 and has a fee of 0.27% and a yield of 3.86%.

FZFXX – Fidelity Treasury Money Market Fund

You may encounter FZFXX as an option in your taxable account. It's basically the same as SPAXX and FDRXX except it does not have the 10% or so in agency securities. This one is entirely U.S. Treasury securities.

In that sense, it is slightly more tax-efficient and thus may appear as a choice for your taxable brokerage account with Fidelity. Its yield should be roughly the same as SPAXX. Right now it is exactly the same as SPAXX at 3.86%. its net expense ratio is 0.28%.

Conclusion

Don't overthink your Fidelity Core Position.

If you are willing to sacrifice return/yield for zero volatility and virtual risklessness, go with the FDIC-insured cash sweep program. If, however, you want a very safe parking garage for cash that would be expected to have a positive nominal return, a government money market fund is a fine choice.

For all intents and purposes, the 3 money market funds on this list are nearly the same thing. Out of these, you may simply want to aim for the highest yield net of fees. SPAXX is the most popular option.

You can also switch between them at any point based on whichever one is paying the most, but this basically comes down to comparing the money market funds and the FDIC program (banks).

Conveniently, interest from the government securities will also be state-tax-exempt.

At the end of the day, this is definitely not a decision to lose sleep over.

What's your Fidelity Core Position? Let me know in the comments.

Fidelity Core Position FAQ's

Lastly, here are some frequently asked questions regarding the Fidelity Core Position and its fund options.

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Disclaimer:  While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.