Schwab offers several municipal (muni) money market mutual funds including the Schwab AMT Tax-Free Money Fund Ultra Shares (SCTXX) and the Schwab AMT Tax-Free Money Fund Investor Shares (SWWXX). Many investors ask about the differences between these two funds since they are two of the largest AMT tax-free muni money market mutual funds in the market today. When comparing SCTXX vs SWWXX, it is clear which fund is best for most investors.
The Short Answer
SCTXX and SWWXX are two share classes of the exact same fund! There is no need to compare SCTXX vs SWWXX because the only difference is the minimum initial investment amount and the expense ratio. Investors who can make an initial purchase of $1M or more will get a higher yield with SCTXX.
SCTXX vs SWWXX Historical Performance
Since its inception, SCTXX has outperformed SWWXX by .08% on an annualized basis. This has compounded to a .23% cumulative difference over the past 3 years, which is relatively small. Currently the yield difference is about .15% however, so future performance may deviate further.
Current Yields for SWWXX & SCTXX
The current 7 day yield is a standardized yield metric for money market mutual funds and the 7 day yields for both SCTXX and SWWXX can be found on the fund’s webpages. See here for SWWXX and here for SCTXX.
What rate is SCTXX & SWWXX paying?
The current interest rate for SCTXX, SWWXX, and other Schwab money markets can be found on Schwab’s money market page.
SWWXX & SCTXX Details
The expense ratio is .34% for the SWWXX investor shares and .19% for the SCTXX ultra shares. Since the funds are just different share classes of the same portfolio, this difference in expenses is what accounts for the differences in yield and performance. Neither fund charges a load or 12b-1 fees.
SWWXX has no minimum investment and investors can invest as little as one cent, while SCTXX has a minimum investment of $1 million. My observation is that investors can keep SCTXX even if they sell and their balance falls below $1 million. The $1 million minimum seems to only apply to the initial purchase.
I have not checked every brokerage, but SCTXX and SWWXX is generally only available to clients of Charles Schwab.
Like most money market mutual funds, investors can sell SCTXX or SWWXX at any time.
SWWXX & SCTXX Risks
Hypothetically, an investor could lose money with SCTXX or SWWXX, but I personally do not think that is a realistic risk as I believe the fund sponsor or the federal government would intervene if that were about to happen. Technically, it is possible to lose money in SWWXX or SCTXX though.
As of June 30, 2023, the fund was composed of approximately $947 million in the investor shares and $1.2 billion in ultra shares.
IS SWWXX or SCTXX FDIC Insured?
No, neither SWWXX nor SCTXX are FDIC insured.
Holdings
The two funds are share classes of the same portfolio, so the holdings are identical. The funds own 48% variable rate demand obligations (VRDNs), 27% tender option bonds, 12.4% commercial paper, and some smaller asset classes. 87.1% of the funds’ holdings have an effective maturity of less than one week.
High Balances
Investors allocating more than $1 million may want to consider the “ultra” share class of the fund, whose symbol is SCTXX.
Tax Considerations
SWWXX and SCTXX are municipal funds which means that they only invest in municipal-related securities. However, investors who are not in the highest marginal tax rates may be better off investing in a non-muni money market fund.
Muni Money Market Funds
Investors subject to higher tax rates may consider municipal (muni) money market funds due to the fact the interest is typically exempt from federal income tax (and often from state tax too!).
The caveat with muni money market funds though is that the yields can move up and down A LOT. Therefore, the stated yield that an investor looks up on any given day is not necessarily indicative of the future return. To understand why, read my post on muni money market yields.
Rather than expecting a muni money market fund’s stated yield, I encourage investors to expect the trailing average yield (over the past few weeks). Generally speaking, the after tax returns of munis will only be higher than non-muni money markets for those in the highest tax brackets.
Which is Best? SCTXX or SWWXX?
Overall, SWWXX is a good investment for many situations. Those investing more than $1 million should generally go with SCTXX for the higher yield. Investors who are not subject to the highest tax rates may want to consider other funds though.
