SPAXX vs. FDRXX – Which is Best For You?
The Quick Answer
The aim of money market funds such as SPAXX and FDRXX is to provide a consistent source of income for investors.
FDRXX has a lower expense ratio and nearly identical holdings to SPAXX, making it the ideal choice for most investors.
Choosing SPAXX or FDRXX as your Fidelity core position might not have a significant impact on your long-term investment success.
Ideally, your retirement funds shouldn't be sitting in cash but should be invested according to your financial goals and preferences.
However, if you wish to keep your funds in fixed-income investments, let’s dive into the differences to help you determine which is better for you.
SPAXX vs. FDRXX Detailed Comparison
What is a “Core Position”?
A core position in an investment account, like a brokerage or Roth IRA, holds your uninvested cash. It's essentially a deposit account within your investment account, meant to temporarily store your liquid cash before you invest it in various assets.
Core investments are common for people nearing retirement or those who may need the cash sooner than their investment holding period.
Why This Choice May Not Be Highly Consequential
Most of your cash should ideally be invested in stocks to take advantage of the time value of money. Idle cash sitting in money market funds does not have nearly the amount of growth potentially as stocks.
Therefore, young investors with long investment holding periods should consider investing in more stocks than money market funds.
Overview of SPAXX (Fidelity Government Money Market Fund)
SPAXX invests in U.S. government securities and repurchase agreements, offering stability and liquidity.
Overview of FDRXX (Fidelity Treasury Fund)
FDRXX primarily focuses on U.S. Treasury securities. It appeals to ultra-conservative investors or those specifically looking to invest in Treasuries.
Key Differences Between SPAXX and FDRXX
Investment Focus: SPAXX and FDRXX both invest in U.S. government securities.
Expense Ratios: SPAXX has an expense ratio of 0.42%, and FDRXX has 0.34%, affecting the net returns for investors.
Risk Profiles: FDRXX is perceived as marginally safer due to its Treasury-only composition.
The Options
Both SPAXX and FDRXX provide a safe place for uninvested cash, offering easy liquidity and no minimum investment threshold. While their returns are modest, the choice between them depends more on personal preference and specific investment strategies.
The Bottom Line
The purpose of an investment account is to grow wealth over time. Having too much uninvested cash can hinder this goal. Whether you choose SPAXX or FDRXX should align with your broader investment strategy, focusing on long-term growth rather than the performance of the core account.
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FAQ
What is the difference between SPAXX and FDRXX?
The primary difference is in their expense ratios and investment focus. SPAXX has a broader government security scope with a higher expense ratio, while FDRXX focuses on Treasury securities with a lower expense ratio.
