Fidelity Money Market Funds – Choosing the Best One

Money market mutual funds like those offered by Fidelity Investments are indispensable instruments, providing liquidity and relative safety. Although not federally insured, Fidelity money market funds usually generate higher income than bank accounts. They also enable investors to temporarily park cash before exchanging into long-term funds.

Although money market funds may appear simple investments, you need to look beyond just current yield and expense ratio to figure out the best Fidelity money market fund for your hard-earned dollars. And, this article helps you do just this.

Before getting into the nitty-gritty, here is a quick word on the definition of a money market fund.

Money Market Fund Definition

Money market funds are financial instruments that invest in stable short-term securities like Treasury bills, bank CDs, commercial paper, repurchase agreements, or variable rate demand notes. Money market funds attempt to keep their net asset value (NAV) constant at $1.00 per share. Their yields change based on the earnings they derive from investments.

The Securities & Exchange Commission requires U. S. money market funds to invest in high quality, high liquidity assets to keep the fund’s weighted average life and weighted average maturity at or less than 120 days and 60 days, respectively.

Fidelity Money Market Funds
When analyzing Fidelity money market funds, you need to look beyond current yield and expense ratios.

Fidelity offers 36 taxable and tax-exempt money market funds. Of these, 22 cater to retail investors and have a minimum initial investment requirement of less than $25,000. The remaining 14 cater to institutional investors and have a minimum initial investment requirement of $1 million or more.

To help you figure out which Fidelity money market fund is best for you, here are key differences among Fidelity money market funds for retail investors.

Taxable Fidelity Money Market Funds

1. U. S. Treasury Money Market Funds

Fidelity U. S. Treasury Money Market Fund (FDLXX) invests nearly all of its assets in U. S. Treasury bills that are guaranteed by the federal government. This fund is open to current account holders.

2. U. S. Government and Government Agency Money Market Funds

Fidelity U. S. Government Reserves (FGRXX) and Fidelity Government Money Market Fund (SPAXX) invest most of their assets in U. S. Treasury bills and debt instruments of Federal Agencies.

3. Diversified Taxable Money Market Funds

Fidelity Cash Reserves (FDRXX), Fidelity Select Money Market Portfolio (FSLXX) and Fidelity Money Market Fund (SPRXX) invest their assets in deposits issued by foreign banks and commercial paper issued by domestic and foreign companies. These Fidelity money market funds often offer higher returns than those offered by U. S. Treasury and other government money market funds.

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Tax Exempt Fidelity Money Market Funds

1. National Municipal Money Market Funds

Fidelity Municipal Money Market Fund (FTEXX) and Fidelity Tax-Free Money Market (FMOXX) invest a major part of their assets in debt securities like variable rate demand notes issued by municipalities.

2. State Municipal Money Market Funds

Fidelity offers state-specific municipal money market funds for Arizona, California, Connecticut, Massachusetts, Michigan, New Jersey, New York, Ohio, and Pennsylvania. These funds invest a major part of their assets in debt securities issued by municipalities in their namesake state.

3. State Municipal AMT Tax Free Money Market

Fidelity offers state-specific AMT tax-free money market funds for California, Massachusetts, New Jersey, and New York. These funds invest a major part of their assets in debt securities issued by municipalities in their namesake state while normally avoiding private-activity municipal securities since interest from the latter is subject to the alternative minimum tax.

Choosing the Best Fidelity Money Market Fund

It is useful to evaluate Fidelity money market funds on four dimensions to determine the best fit.

After-tax income: Income from different types of money market funds is treated differently for tax purposes. Dividends from government money market funds are totally or partially exempt from state income taxes while those from national municipal money market funds are exempt from federal income taxes.

Income from state-specific municipal money market funds is exempt from both federal and state income taxes. AMT tax free money market funds seek to provide income that is sheltered from the alternative minimum tax.

You can maximize your after-tax income from a Fidelity money market fund by considering factors such as your marginal tax bracket and state of residence.

Account type: Qualified accounts such as Individual Retirement Accounts provide tax-deferred growth. Taxable money market funds are often a better choice than tax-exempt money market funds for investing monies in qualified accounts.

Risk: While the probability of money market funds breaking the $1.00 NAV mark is remote, there have been a few instances. Fidelity U. S. Treasury money market fund is the safest of the lot while Fidelity U. S. Government Reserves and Fidelity Government Money Market Fund are a close second. Money market funds investing in commercial paper or debt issued by municipalities tend to carry a bit more risk.

Features: From applicability and usage perspectives, minimum amounts for opening an account, maintaining the account, and writing checks need to be considered.

Fidelity Taxable Money Market Funds

Fidelity Money Market Funds

Ticker

Minimum Amount

Exp. Ratio, %

Yield, %

Init. Invest.

A/C Balance

Checks

Fidelity Cash Reserves

FDRXX

$2,500

$2,000

$500

0.41

0.03

Fidelity U. S. Government Reserves

FGRXX

$2,500

$2,000

$500

0.44

0.01

Fidelity Select Money Market Portfolio

FSLXX

$2,500

$2,000

N. A.

0.33

0.11

Fidelity U. S. Treasury Money Market Fund

FDLXX

$25,000

$10,000

$1,000

0.45

0.01

Fidelity Government Money Market Fund

SPAXX

$25,000

$10,000

$1,000

0.45

0.01

Fidelity Money Market Fund

SPRXX

$25,000

$10,000

$1,000

0.44

0.01

Fidelity National Municipal Money Market Funds

Fidelity Money Market Funds

Ticker

Minimum Amount

Exp. Ratio, %

Yield, %

Init. Invest.

A/C Balance

Checks

Fidelity Municipal Money Market Fund

FTEXX

$5,000

$2,000

$500

0.47

0.01

Fidelity Tax-Free Money Market

FMOXX

$5,000

$2,000

$500

0.51

0.01

Fidelity AMT Tax-Free Money Fund

FIMXX

$25,000

$10,000

$1,000

0.48

0.01

State Municipal Money Market Funds

Fidelity Money Market Funds

Ticker

Minimum Amount

Exp. Ratio, %

Yield, %

Init. Invest.

A/C Balance

Checks

Fidelity Arizona Municipal Money Market Fund

FSAXX

$5,000

$2,000

$500

0.54

0.01

Fidelity California Municipal Money Market Fund

FCFXX

$5,000

$2,000

$500

0.55

0.01

Fidelity Connecticut Municipal Money Market Fund

FCMXX

$5,000

$2,000

$500

0.53

0.01

Fidelity Massachusetts Municipal Money Market Fund

FDMXX

$5,000

$2,000

$500

0.55

0.01

Fidelity Michigan Municipal Money Market Fund

FMIXX

$5,000

$2,000

$500

0.60

0.01

Fidelity New Jersey Municipal Money Market Fund

FNJXX

$5,000

$2,000

$500

0.55

0.01

Fidelity New York Municipal Money Market Fund

FNYXX

$5,000

$2,000

$500

0.54

0.01

Fidelity Ohio Municipal Money Market Fund

FOMXX

$5,000

$2,000

$500

0.57

0.01

Fidelity Pennsylvania Municipal Money Market Fund

FPTXX

$5,000

$2,000

$500

0.53

0.01

Fidelity California AMT Tax-Free Money Market Fund

FSPXX

$25,000

$10,000

$1,000

0.34

0.05

Fidelity Massachusetts AMT Tax-Free Money Market Fund

FMSXX

$25,000

$10,000

$1,000

0.34

0.01

Fidelity New Jersey AMT Tax-Free Money Market Fund

FSJXX

$25,000

$10,000

$1,000

0.34

0.01

Fidelity New York AMT Tax-Free Money Market Fund

FSNXX

$25,000

$10,000

$1,000

0.34

0.04

 

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