Fidelity money market funds like SPRXX vs SPAXX are essential investment vehicles as they enable investors to make short-term investments and move the returns into long-term investments.
Money market funds are a perfect way to park cash for long-term investments and are relatively safe accounts.
The key difference between these two funds is that SPRXX is a Fidelity prime money market fund, whereas SPAXX is a Fidelity government market fund.
In essence, while SPRXX invests in any eligible money market investment denominated in U. S. dollars, SPAXX invests majorly in debt issued by the U. S. Treasury and U. S. Government-sponsored entities.
Let’s take a detailed look into the two funds to understand the implications of their differences.
Category: Prime Money Market
Portfolio Style: Prime Money Market
Fund Inception: February 5, 1990
Expense Ratio: 0.42%
Fidelity Prime Money Market Fund (SPRXX) is popular among the Fidelity prime money market funds.
The fund seeks a high level of current income, consistent with the preservation of capital and liquidity, by investing in U.S. dollar-denominated money market securities, repurchase agreements, and possibly reverse repurchase agreements. The fund intends to invest at least 25% of its assets in the financial services sector.
SPRXX has a heavy weighting towards the financial services industry, and it invests over 25% of its total assets in the financial services industry.
The fund follows the industry-standard regulatory requirements stipulated for all money market funds in maturity, quality, liquidity, and diversification.
Performance & Returns
Category: U.S. Govt Money Mkt
Portfolio Style: U.S. Govt Money Mkt
Fund Inception: February 5, 1990
Expense Ratio: 0.42%
Fidelity Government Money Market Fund (SPAXX) is popular among the Fidelity US govt money market fund.
The fund seeks as high a level of current income as is consistent with the preservation of capital and liquidity. Invests in U.S. government securities and repurchase agreements for the same and enters into reverse repurchase agreements.
Created in 1990, Fidelity Government Money Market Fund (SPAXX) is among the top government money market funds globally.
SPAXX boasts $219.95 billion in total assets, making it one of the most widely held money market funds. As a result, it’s one of the perfect investments for investors that seek a broad range of investments.
SPAXX is very similar to the American Century Capital Preservation Fund in its mission. This fund aims at providing investors with high-yield returns, high liquidity, and preservation of capital.
Typically, the fund is nearly 100% invested in cash or cash equivalents (short-term U.S. government securities or repurchase agreements collateralized by U.S. Treasury securities.
SPAXX Performance & Returns
SPRXX vs SPAXX: Comparison
SPAXX vs SPRXX: Composition By Instrument
SPRXX vs SPAXX: Holdings – Concentration Analysis
SPRXX vs SPAXX: Performance – Average Annual Returns
SPAXX vs SPRXX: Cost (Operational Fees)
Money market funds such as SPRXX and SPAXX refer to mutual funds that invest in fixed income debt securities. Some characteristics such as short maturities and low risk make this mutual fund unique.
Money market funds are issued by government entities or companies who sometimes borrow money from investors to fund particular projects.
The repayment plan is often set for a short period where the government or the company pays back both principal and interest to the investors.
Some retail investors utilize money market funds to save funds on a short-term basis. This strategy can serve to manage volatility and reach goals or emergencies.
Money market funds have 3 major categories:
- Government Money Market Funds
- Prime Money Market Funds
- Municipal Money Market Funds
Here’s where the difference between SPRXX and SPAXX comes in.
SPRXX belongs to prime money market funds, while SPAXX is a government money market fund.
SPRXX Is A Prime Money Market Fund
SPAXX Is A Government Money Market Fund
SPRXX primarily invests its assets in U.S. dollar-denominated money market securities of domestic and foreign issuers, U.S. government securities, and repurchase agreements.
SPAXX invests at least 99.5% of the total assets in cash, U.S. government securities, and repurchase agreements.
Some investors select a government money market fund (SPAXX) as a core position to temporarily operate a brokerage account and make, receive, or hold money. In such a case, the investor enjoys tax efficiency.
Choosing Between SPRXX and SPAXX
When choosing between SPRXX and SPAXX (money market funds), you may have to consider some factors, which include:
- Tax efficiency: Here, the government’s money market fund (SPAXX) becomes the pick. Investing in SPAXX may offer you full or partial exemption or tax-deferred tax. However, that means that you may have to intentionally choose your state of residence or a favorable marginal tax bracket.
- Fund features: Both funds are similar in cost (fund expenses), with an expense ratio of 0.42% and management fees of 0.25%.
SPRXX and SPAXX also do not have 12b1, front-end or back-end sales fees, and minimum investments. As a result, both funds are low-cost funds, one of the selling points of mutual funds.
Regarding performance, SPAXX has a lower 5-year return than SPRXX (0.81% vs 0.98%).
For holdings, SPAXX offers better diversification with 299 holdings majorly spread across U.S. Treasury and repurchase agreements.
Both SPRXX and SPAXX pay as low as 0.01% in dividends.
This means that dividends might not be the best factor to consider when deciding between the two funds.
Which Mutual Fund is Better?
From the SPRXX vs SPAXX analysis, the two funds are identical in many ways. However, the most significant difference between SPRXX and SPAXX is where they invest their assets.
SPAXX is a popular choice for many retail and institutional investors.
Historically it offers better interest rates and yet remains very liquid and safe. As a result, the possibility of losing value is low, and you can get your money anytime.
Also, the Fidelity government money market fund (SPAXX) is a taxable money market fund, meaning you can take advantage of the taxable income tax bearing option (FCASH).
FCASH is a free credit balance that is payable to you when you place a request to Fidelity.
If you invest in SPAXX as a core position in a brokerage when interest rises in the future, you will most likely make higher returns.
All these, however, do not rule out the possibility of losses, but SPAXX is an excellent short-term investment vehicle and is apt to keep the money for liquidity.
Eventually, you’ll have to decide whether to go for SPRXX or SPAXX, but SPAXX might be a better option based on all the above-enumerated points.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.