SPAXX vs. SGOV: Which Is Better for Cash at Fidelity?

Yields move with the Fed. Figures here are anchored to Fidelity and iShares data as of late August 2026, with each number carrying its own as-of date. The framework for choosing does not move.

If you hold cash at Fidelity, you almost certainly hold SPAXX, because Fidelity makes it the default core position that catches every deposit and pays every bill. SGOV, the iShares 0-3 month Treasury bill ETF, has become the internet’s favorite alternative, and the comparison threads are full of confident answers that mishandle the two details the decision turns on: how each is taxed at the state level, and how fast each turns back into spendable money.

The short answer: these two funds are good at different jobs, and most Fidelity investors with a meaningful cash balance should hold both. SPAXX wins for cash you spend, because the core position works automatically. SGOV wins for cash you store, because it yields more after tax, and the gap widens sharply in high-tax states. The rest of this guide, and the calculator in the middle of it, puts dollar figures on that split for your balance and bracket.

The verdict by use case

What each fund is

SPAXX is the Fidelity Government Money Market Fund, a mutual fund that targets a stable $1.00 share price and holds government-related paper: Treasury bills, agency debt, and a large allocation to repurchase agreements collateralized by government securities. Its expense ratio is 0.42%, and its quoted 7-day yield was 3.33% as of August 31, 2026.¹ As a core position, it is the account’s cash wallet: deposits land in it, purchases draw from it, and checks, debit card activity, and transfers pull from it automatically, with no order required.⁵

SGOV is the iShares 0-3 Month Treasury Bond ETF. It tracks the ICE 0-3 Month US Treasury Securities Index, holds essentially nothing but Treasury bills inside three months of maturity, charges 0.09%, and posted a 3.61% 30-day SEC yield as of August 28, 2026, with about $106 billion in assets, an effective duration of 0.12 years, and a 0.01% median bid/ask spread.² It trades like a stock, which means both intraday liquidity and, as covered below, a settlement clock.

One measurement note before comparing them: a money market fund’s 7-day yield and an ETF’s 30-day SEC yield are both annualized income measures net of fund expenses, but they average over different windows, so they are close proxies rather than identical yardsticks.⁸ Both are already net of each fund’s expense ratio. Comparison articles that subtract SPAXX’s 0.42% or SGOV’s 0.09% from the quoted yields are double-counting the expense drag.

The pre-tax yield gap is modest

At the late-August 2026 snapshot, SGOV out-yielded SPAXX by 28 basis points, 3.61% versus 3.33%. On $10,000 that is $28 per year before tax. Most of that gap traces to expenses: the two funds fish in adjacent ponds of short government paper, and SPAXX charges 0.33% more to do it. The pre-tax gap alone rarely justifies extra mechanics on a small balance. What changes the arithmetic is state tax.

After tax is where SGOV pulls ahead

Interest from U.S. Treasury obligations is exempt from state and local income tax, but funds only pass that exemption through in proportion to the share of their income actually earned from government obligations. The 2025 issuer documents put the two funds far apart:

• SGOV: 95.14% of 2025 income was U.S. government source, and iShares reports the fund held at least 50% federal obligations at every quarter-end.⁴
• SPAXX: 50.90%, roughly half, because repurchase agreements do not count as direct government obligations. Fidelity also flags SPAXX (and its Treasury sibling FZFXX, at 61.52%) as having failed the minimum-investment test that California, Connecticut, and New York require, so residents of those three states get no state exemption on SPAXX dividends for 2025.³

The after-tax yield formula, with $e$ as the government-source fraction, $t_f$ the federal marginal rate (plus 3.8% NIIT if it applies), and $t_s$ the state rate:

Three worked examples on a $100,000 balance at a 32% federal rate, no NIIT, using the August 2026 yields above. These are scenario outputs; your own inputs move them.

Notice the shape of the result. In a no-tax state the advantage is small and mostly the expense gap. In California, New York, or Connecticut, the threshold rule turns SPAXX fully state-taxable while SGOV stays 95% exempt, and the advantage roughly hits half a percent a year. Scale matters just as much: the same California scenario on a $10,000 balance is worth about $48 a year, which many people will reasonably decide is beneath their attention.

Run your own numbers

Set your balance, bracket, and state. The government-source percentages are editable because they reset every year when Fidelity and iShares publish new tax documents.

What happens when you need the money

This is the half of the comparison that yield tables skip, and it is the reason SGOV should not hold every dollar.

SPAXX requires no action to spend. Fidelity processes withdrawals, checks, debit card charges, bill pay, and securities purchases directly against the core position; sale proceeds sweep back into it automatically.⁵ Cash in SPAXX today can leave Fidelity today.

SGOV requires a sale first, and U.S. ETF trades settle the next business day under the T+1 cycle in effect since May 2024.⁶ Fidelity reflects the sale in “cash available to trade” immediately, so you can buy something else with the proceeds right away, but “cash available to withdraw” only picks it up on settlement date.⁵ Sell SGOV Friday afternoon and the money can leave for your bank Monday. For an emergency fund that backstops a same-day crisis, that one-day gap argues for keeping the first month of expenses in the core (or a bank account) and letting SGOV hold the slower layers.

Safety: what protects each fund, and from what

• Neither is FDIC insured. FDIC insurance covers bank deposits, and both of these are securities.
• Both are covered by SIPC at the brokerage level, which protects up to $500,000 (including $250,000 for cash) if the broker itself fails with assets missing. SIPC treats money market fund shares as securities, and it never covers market losses.⁷
• Investment risk is minimal for both, in different wrappers. SGOV holds Treasury bills directly; its share price wobbles by pennies within the month. SPAXX targets a stable $1.00 but, like every money market fund, cannot guarantee it; the prospectus states plainly that you could lose money and that Fidelity is not required to support the fund. Both risks are real and both are remote. If explicit deposit insurance is the requirement, the answer is a bank product, and Fidelity’s FDIC sweep pays materially less (1.84% APY as of August 31, 2026).⁹

Why SGOV’s price drops every month

New SGOV holders regularly panic at a one-day price drop in the first week of the month. It is the dividend. SGOV accrues interest income all month, so its net asset value climbs a few cents from roughly $100.00 toward $100.30, then falls back on the ex-dividend date when the accrued income is paid out as a distribution. Total return is smooth; the price alone is a sawtooth. Two practical corollaries: judging SGOV by its price chart understates its return by the entire dividend stream, and buying just before the ex-date is not free money, because the price you pay includes the accrued income you are about to receive back as a taxable distribution.

When switching to SGOV is not worth it

• Small balances. At the August 2026 yields, a no-state-tax investor in the 32% bracket picks up roughly 19 basis points after tax, about $19 a year per $10,000. The calculator’s break-even output makes this concrete for your own threshold.
• Cash you spend within days. The T+1 delay plus the need to place a trade makes SGOV strictly worse as a wallet.
• Inside an IRA. State tax does not reach tax-deferred income, so the comparison collapses to 3.61% versus 3.33% (August 2026), worth having but not worth much ceremony.
• If you want the tax benefit without ETF mechanics. Fidelity’s Treasury Only fund FDLXX was 98.67% government source for 2025 and passed the CA/CT/NY test; it yielded 3.39% on August 31, 2026 and can sit alongside your core, where Fidelity will automatically draw on it to cover debits when the core runs dry.³ Our companion guide on choosing a Fidelity core position covers that setup.

Key takeaways

• Use both, by job. SPAXX for cash that moves this month, SGOV for cash that sits. The core position’s automation is worth more than 28 pre-tax basis points on spending money.
• The quoted yields are net of expenses. SGOV 3.61% (30-day SEC yield, Aug 28, 2026) versus SPAXX 3.33% (7-day yield, Aug 31, 2026). Do not subtract expense ratios from either.
• State tax is the real separator. For 2025, SGOV was 95.14% government-source income; SPAXX was 50.90% and failed the CA/CT/NY minimum entirely.
• The dollar stakes scale with balance and bracket. For a modeled $100k balance at 32% federal, the SGOV advantage ran from about $190/yr (no state tax) to about $484/yr (California, 2025 rules) at August 2026 yields.
• SGOV money is a business day away. Sales settle T+1, and withdrawal has to wait for settlement, so keep the first layer of emergency cash in the core.
• Neither fund is FDIC insured. Both sit behind SIPC as securities; if deposit insurance is non-negotiable, that is a different product at a lower rate.

How Summitward helps

Frequently asked questions

Is SGOV exempt from state taxes?

Mostly, and the fraction changes annually. For 2025, iShares reported 95.14% of SGOV’s income as U.S. government source, and the fund met the quarterly 50% asset test that California, Connecticut, and New York require. You apply the exemption yourself on your state return; the 1099-DIV reports the income as ordinary dividends and the percentage comes from the issuer’s annual tax letter.

Is SPAXX FDIC insured?

No. SPAXX is a government money market mutual fund, a security. It is covered by SIPC if the brokerage fails, and its holdings are government-related paper, but there is no deposit insurance and the stable $1.00 price is a target rather than a guarantee. Fidelity’s FDIC-insured alternative is the deposit sweep, which paid 1.84% APY as of August 31, 2026.

Do I need to sell SPAXX to buy SGOV?

No. Place a buy order for SGOV and Fidelity pays for it from the core position automatically at settlement. The reverse is also automatic: when you sell SGOV, the proceeds sweep back into SPAXX.

How fast can I get money out of SGOV?

You can sell any time the market is open and immediately use the proceeds to buy something else. Moving the money out of Fidelity waits for T+1 settlement: sell Tuesday, withdraw Wednesday; sell Friday, withdraw Monday.

Is FDLXX better than both?

For a taxable investor in a high-tax state who wants money market mechanics, FDLXX is a strong middle path: 98.67% government-source for 2025 (passing the CA/CT/NY test) with a 3.39% 7-day yield as of August 31, 2026. It cannot be a core position, so it takes one manual buy, after which Fidelity will automatically liquidate it to cover debits if your core runs out. SGOV still yielded more at the same snapshot because its expense ratio is 0.33% lower.

Does any of this matter in an IRA?

The tax half does not; IRA income is not state-taxed as it accrues, so government-source percentages are irrelevant there. The yield gap and the settlement mechanics still apply as they do in a taxable account.

Related guides

• Best Fidelity Core Position: SPAXX vs. FZFXX vs. FCASH vs. FDIC Sweep: which fund should catch your cash automatically.
• Where to Park Your Cash: the full three-layer reserve framework across HYSAs, Treasuries, and munis.
• SGOV vs USFR: fixed-bill versus floating-rate Treasury ETFs for the reserve layer.
• SGOV vs. T-Bills vs. HYSA: the quick three-way comparison outside Fidelity.
• Emergency Fund Sizing: how many months the layers should add up to.

Sources

1. Fidelity Institutional, “Fidelity Money Market Funds: Month-End Yields,” as of August 31, 2026. institutional.fidelity.com
2. iShares, SGOV fund page: yield, assets, duration, spread, and index data as of August 28-31, 2026. ishares.com
3. Fidelity, “2025 Percentage of Income from U.S. Government Securities” (SPAXX 50.90%, FZFXX 61.52%, FDLXX 98.67%; CA/CT/NY minimum-investment footnote). fidelity.com (PDF)
4. BlackRock, “2025 iShares U.S. Government Source Income Information” (SGOV 95.14%; quarterly 50% federal-obligation marker). ishares.com (PDF)
5. Fidelity, “Trading FAQs: About Your Trading Account” (core position mechanics, FCASH rate, balance definitions). fidelity.com
6. U.S. Securities and Exchange Commission, “SEC Marks Compliance Date for T+1 Settlement Cycle,” May 21, 2024. sec.gov
7. SIPC, “What SIPC Protects” (limits; money market funds protected as securities; no market-loss coverage). sipc.org
8. Fidelity fund fact sheets, 7-day yield definition: income net of expenses, annualized over the prior seven days. institutional.fidelity.com (PDF)
9. Fidelity, FDIC-Insured Deposit Sweep Program interest rates (1.82% rate, 1.84% APY as of August 31, 2026). digital.fidelity.com

Author disclosure

Educational content, not investment or tax advice. Yields are dated snapshots that move with the Fed, and the government-source percentages are 2025 tax-year figures that reset when the issuers publish new documents each year. Verify both against the primary sources linked above before acting or filing. Summitward has no affiliation with Fidelity or BlackRock.