The best Fidelity money market fund depends on what you're saving for and how much you have to invest

Fidelity offers several money market funds, each with different minimum investments, expense ratios, and yield rates. There is no single "best" fund — the right choice depends on whether you're parking cash short-term, building an emergency fund, or holding money between investments. The funds also differ in what they invest in: some hold U.S. Treasury securities, others hold commercial paper and bank deposits, and some are tax-advantaged for specific situations.

Your choice also matters because money market funds are not FDIC-insured the way a savings account is. They're mutual funds, so their value can fluctuate slightly, though that risk is very small. The trade-off is that they typically pay higher interest than a regular savings account, which is why people use them for cash they want to keep safe but earning something.

Key Takeaways

  • Fidelity's Government Money Market Fund (SPAXX) invests only in U.S. Treasury securities and is the lowest-risk option, though it typically pays less interest than other money market funds.
  • The Fidelity Cash Reserves Fund (MMRXX) holds a mix of Treasury securities, bank deposits, and commercial paper, offering higher yields than government-only funds with slightly more risk.
  • Tax-exempt money market funds exist if you're in a high tax bracket and hold the fund in a taxable account, though they usually pay lower nominal interest rates.
  • Minimum investments range from $1 to $25,000 depending on the fund, so check the specific fund's requirements before opening it.
  • Expense ratios (the annual fee the fund charges) vary between 0.42% and 0.65%, which matters more when interest rates are low.

Government Money Market Fund (SPAXX) — the safest choice

Fidelity's Government Money Market Fund, ticker SPAXX, holds only U.S. Treasury bills and repurchase agreements backed by Treasuries. This is the lowest-risk money market fund Fidelity offers because the U.S. government backs every holding. If you're nervous about any fluctuation in value or you're holding money you absolutely cannot afford to lose, this is the fund to choose.

The trade-off is yield. Because Treasury securities are the safest investment available, they pay less interest than funds that hold riskier assets like commercial paper (short-term corporate debt). When interest rates are high, the difference is small. When rates are low, you'll notice it more. The expense ratio is 0.42% annually, which is Fidelity's lowest among money market funds. The minimum investment is $1.

Cash Reserves Fund (MMRXX) — the middle ground

The Fidelity Cash Reserves Fund, ticker MMRXX, holds a diversified mix of Treasury securities, bank certificates of deposit, and commercial paper from highly-rated companies. This fund takes on slightly more risk than SPAXX in exchange for higher yields. The risk is real but small — commercial paper is short-term debt from stable companies, and the fund's managers are looking for the safest options within that category.

MMRXX typically pays more interest than SPAXX because of this diversification. The expense ratio is 0.42% annually, the same as SPAXX. The minimum investment is $1. This fund makes sense if you want better returns than pure Treasury holdings but don't want to take on the risk of a bond fund or stock fund.

Treasury Money Market Fund (SPAXX vs. alternatives)

Beyond SPAXX, Fidelity offers other Treasury-focused options through its institutional share classes, but these typically require much higher minimums ($25,000 or more) and are designed for investors with larger amounts to park. For most people, SPAXX is the Treasury option to consider.

If you're comparing Fidelity's Treasury fund to money market funds at other brokerages, the differences are usually small — all Treasury money market funds hold similar assets and carry similar risks. The main differences are expense ratios and current yields, both of which change over time.

Tax-exempt money market funds for high-income earners

Fidelity offers tax-exempt money market funds that hold municipal bonds and other tax-free securities. These make sense only if you're in a high federal tax bracket (usually 32% or higher) and you're holding the fund in a taxable account, not a retirement account. The interest you earn is not subject to federal income tax, which can make a lower nominal yield more valuable after taxes.

The catch: tax-exempt funds pay significantly less interest than taxable money market funds because of the tax advantage. You need to do the math. If a taxable fund pays 5% and a tax-exempt fund pays 3%, and you're in the 24% tax bracket, the taxable fund nets you 3.8% after taxes — still better. Only use a tax-exempt fund if the math clearly favors it for your situation.

How to choose based on your time horizon

If you're holding money for less than a year — say, cash you're about to invest in stocks or bonds — either SPAXX or MMRXX works fine. The difference in interest over a few months is small. SPAXX is simpler if you want zero risk; MMRXX is better if you want to maximize the small amount of interest you'll earn.

If you're holding money for one to three years, MMRXX becomes more attractive because the extra yield compounds. If you're holding money longer than that and you can tolerate more volatility, a short-term bond fund or a high-yield savings account might serve you better — a money market fund is designed for cash, not for long-term growth.

Comparing Fidelity money market funds to other options

Money market funds are not the only place to park cash. High-yield savings accounts at online banks often pay similar or higher interest rates and offer FDIC insurance up to $250,000 per account. The downside is that you can't trade them as easily — they're savings accounts, not mutual funds. If you need the money to stay liquid and accessible, a money market fund works. If you're comfortable with a slight delay in accessing the money, a high-yield savings account might be simpler.

Money market funds also differ from money market accounts at banks, which are a hybrid between a savings account and an investment account. Money market accounts are FDIC-insured but usually pay less interest than either a money market fund or a high-yield savings account. For most people, a money market fund or high-yield savings account is the better choice.

Frequently Asked Questions

Can the value of a money market fund go down?

Yes, though it's rare. Money market funds are designed to keep their share price stable at $1, but the value can fluctuate slightly. In extreme market stress, a money market fund could "break the buck" and fall below $1, but this has happened only a handful of times in history. Fidelity's funds have never broken the buck.

What's the difference between SPAXX and MMRXX in plain terms?

SPAXX holds only Treasury securities backed by the U.S. government. MMRXX holds Treasuries plus corporate short-term debt and bank deposits. MMRXX pays more interest because it takes on slightly more risk. Both are very safe, and the difference in risk is small.

Should I use a money market fund or a high-yield savings account?

High-yield savings accounts pay similar interest and offer FDIC insurance, making them simpler for most people. Money market funds are better if you want to trade in and out quickly or if you prefer the mutual fund structure. For emergency funds or cash you're holding long-term, a high-yield savings account is usually easier.

Do I have to pay taxes on money market fund interest?

Yes, unless you hold the fund in a tax-advantaged account like an IRA or 401(k). Interest from taxable money market funds is taxed as ordinary income. Tax-exempt money market funds avoid federal income tax on interest, but only if you're in a high enough tax bracket for the math to work in your favor.

What happens if interest rates fall after I invest?

The value of your shares stays at $1, but the interest rate the fund pays will drop. If you're earning 4% now and rates fall to 2%, your fund will start paying 2%. You don't lose money, but your income from the fund decreases. This is why money market funds are best for cash you need to keep safe, not for growth.