Which Core Position Should You Choose? SPAXX vs FDIC (Fidelity)

I get this question all the time when someone is opening a new Roth IRA or brokerage account with Fidelity. “Which core position should I choose?” when they see an option like below.

The answer: It doesn’t matter, but for any sort of investment account (like an IRA) use the Money Market Fund (SPAXX) (reasoning below)

Core Position Options - SPAXX vs FDIC

Your “Core Position” is how cash is held in your account when it’s not invested in something else like a target date index fund. That cash just sitting there needs to be “in” something, so Fidelity is asking how you want to hold it:

  • Money Market Fund like the example above with ticker SPAXX is a fund that basically invests in cash. It holds cash, CDs, possibly very short term treasuries, etc. The idea is that a dollar in this fund is always a dollar and maybe it can provide a little bit of interest too. Money in here is very safe… it won’t go down (or up much) in value and is fully liquid for withdrawal whenever you want. It’s a fine place to park cash for short term savings goals to get a bit of interest dripped to you.
  • The FDIC is the Federal Deposit Insurance Corporation. That’s a government organization that basically guarantees your money will be paid back to you if the bank holding it goes out of business. (They actually insure up to $250,000 per account). So with the FDIC-Insured Deposit Sweep Program, Fidelity basically shuffles your money off to real actual bank accounts that are insured by the FDIC. Your money is possibly a little safer in the case of some horrific financial calamity where money market funds lose value somehow, but on the flip side you’ll probably earn less interest in this account.

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ALL THAT SAID, which one you choose doesn’t matter. The reason it doesn’t matter is because when you open an investment account, the point is to have your cash INVESTED in things that go up in value, like index funds. Specifically, inside of an IRA (if you’re not retired yet) you generally shouldn’t have ANY cash, because ALL of that money should be invested. So there won’t be anything in your core position, so it doesn’t matter what core position you pick.

If money does end up in the core position, since this is an investment account you want to optimize growth. Interest rates are currently extremely low, but if they rise in the future, SPAXX will provide higher returns, so choose it.

TL;DR: It doesn’t matter, but pick SPAXX.


Jeremy Circle

Hi, I’m Jeremy! I retired at 36 and currently have a net worth of over $4 million. 

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