The SPAXX Yield, How It Compares

spaxx yield

SPAXX stands for the Fidelity Government Money Market Fund, which offers a relatively high yield compared to other cash equivalent investments. But what exactly is the SPAXX yield and how does it stack up against alternatives?

What is the SPAXX Yield?

The SPAXX yield refers to the annual percentage yield (APY) of the Fidelity Government Money Market Fund. This yield represents the effective annual return on the fund after accounting for daily compounding interest.

As of October 19, 2023, the SPAXX yield is 4.98%. This means investors earn 4.98% interest per year on their balance in the fund based on daily compounding.

The SPAXX yield fluctuates over time based on interest rates and market conditions. But it has been elevated compared to historical averages in recent months.

How the SPAXX Yield Compares to Other Investments

The SPAXX yield tends to be far higher than yields available on cash and short-term savings vehicles:

  • Average bank savings account APY – 0.26%
  • 1-year CD average APY – 0.82%
  • Prime money market fund average yield – 0.79%

So SPAXX offers a significant yield premium over basic deposit accounts and alternatives like prime money market funds.

Why is the SPAXX Yield So High?

The SPAXX fund invests in very short-term government securities like U.S. Treasuries and repos. The ultra-safe nature of these investments allows for a higher yield versus typical savings or money market options.

The massive scale of the SPAXX fund also enables it to earn a higher yield through economies of scale. With over $200 billion in assets, it can access wholesale rates.

Is SPAXX a Good Place to Put Cash?

For investors prioritizing capital preservation and income:

  • SPAXX offers an attractive yield in a very low-risk investment.
  • The yield is not guaranteed to remain high, however, and may decrease.
  • The fund can make sense for short-term savings goals or as a higher-yielding cash parking place.

In summary, the SPAXX yield stands out compared to other cash-equivalent investments, providing a relatively high return backed by ultra-safe government securities.

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