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Fidelity Parks Your Uninvested Cash in SPAXX by Default, and Most Investors Never Look
Дата публикации: 13-08-2026 19:31:19
Fidelity quietly assigned your uninvested cash to a fund you never chose, and the fee structure baked into it means most investors are leaving money on the table without realizing it.
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If you have a Fidelity brokerage account, there is a good chance a fund you never picked is holding a meaningful chunk of your money right now. That fund is Fidelity Government Money Market Fund (NASDAQ:SPAXX), the default core position Fidelity assigns to most new brokerage accounts, and the vast majority of investors never open the hood.
SPAXX is a government money market mutual fund inside FIDELITY HEREFORD STREET TRUST, and per its June 26, 2026 prospectus, it charges a net expense ratio of 0.42%. That is what Fidelity skims off the top of the fund’s gross yield before anything hits your account. On a $50,000 cash balance, that is roughly $210 a year in fund fees, quietly baked into the daily yield you never see itemized.
What SPAXX Actually HoldsA government money market fund is not a bank account. SPAXX invests in short-dated U.S. Treasury bills, government agency debt, and repurchase agreements collateralized by those securities. That means the yield you earn is essentially a function of short-term Treasury rates minus the fund’s expense ratio.
Those short-term rates are anchored to Federal Reserve policy. The federal funds target rate (upper bound) sits at 3.75% as of August 13, 2026, where it has held since December 11, 2025 after three cuts in the back half of 2025. Treasury bills reflect that rate almost mechanically: the 4-week T-bill was yielding 3.69% and the 13-week bill 3.82% as of August 12, 2026. That is the raw material SPAXX buys, then subtracts its 0.42% expense ratio to arrive at your net 7-day yield.
The Not-FDIC-Insured Fine PrintHere is the part most Fidelity investors misunderstand: SPAXX is not FDIC insured. It is a mutual fund, not a bank deposit. In practice, government money market funds are considered among the safest instruments outside of directly held Treasuries, because their portfolios are made up of U.S. government paper and government-collateralized repos. Still, the legal structure matters. If you assumed your cash was sitting in something equivalent to a savings account, it is not.
The upside of the money market fund structure is that yields adjust with the market almost daily. Compare that to the national average 12-month CD rate of 1.68% as of July 1, 2026, and it becomes clear why leaving cash in a bank sweep or basic savings account is often the more expensive mistake.
When SPAXX Is the Wrong Core PositionDefault does not mean optimal. Fidelity offers other core options, and investors with larger balances often benefit from switching. Direct ownership of Treasury bills eliminates the 0.42% fee entirely; a 3-month T-bill yielded 3.87% on August 12, 2026, versus SPAXX’s net yield after expenses. For investors in high state income tax brackets, Treasury bill interest is exempt from state and local taxes, while a portion of SPAXX’s income (the part derived from repos) typically is not.
Investors who want a higher yield and can accept a slight step down the credit ladder might consider Fidelity’s prime money market funds. Those willing to lock cash up for 6 to 12 months can pick up incremental yield in Treasury bills directly: the 6-month bill was at 3.97% and the 1-year at 4.00% on August 12, 2026.
Who Should Leave It AloneSPAXX makes sense as a parking spot for cash you actually need liquid: emergency funds, dry powder waiting to be deployed into stocks, tax money, or the settlement cash from a recent sale. It is daily-liquid, priced at a stable $1 NAV under normal conditions, and requires no action to use.
Investors who should look elsewhere: anyone with a five-figure cash balance who could ladder T-bills instead, anyone in a high-tax state paying full state tax on their sweep interest, and anyone who has drifted into treating SPAXX as a long-term allocation rather than a holding pen. With M2 money supply at $23.16 trillion as of June 1, 2026, a lot of American cash is sitting in exactly this kind of default vehicle, earning less than it could.
Related Funds Worth Researching- Fidelity Treasury Only Money Market Fund (NASDAQ:FDLXX): a close sibling that holds only Treasuries and their repos, often preferred by investors in high-tax states for its higher state-tax-exempt income percentage.
- Vanguard Federal Money Market Fund (NASDAQ:VMFXX): Vanguard’s default sweep, generally with a lower expense ratio than SPAXX, worth comparing if you have accounts at both brokerages.
- SPDR Bloomberg 1-3 Month T-Bill ETF (NYSEARCA:BIL): the ETF alternative for investors who want T-bill exposure inside a taxable brokerage without opening a TreasuryDirect account.
- Fidelity Money Market Fund (NASDAQ:SPRXX): Fidelity’s prime money market fund, which typically yields a bit more than SPAXX in exchange for holding some non-government commercial paper.
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