Investors are increasingly considering money market mutual funds as a place to park cash and earn higher yields. The Schwab Value Advantage Money Fund® – Ultra Shares (symbol SNAXX) is one of the largest money market funds in the market today and many investors are asking is SNAXX a good investment?
The short answer
SNAXX is a good investment for many investors. It offers a competitive yield, has no minimum investment, and is managed by one of the largest asset managers.
Those allocating less than $1M or in the highest tax brackets may need/want to use funds with lower minimums or muni money markets though.
A reminder that this site does not make recommendations. Our goal is to help educate investors and empower them to make good decisions.
Current Yields for SNAXX
The current 7 day yield is a standardized yield metric for money market mutual funds and the 7 day yield for SNAXX can be found on the fund’s webpage at: https://www.schwabassetmanagement.com/products/snaxx.
What rate is SNAXX paying?
The current interest rate for SNAXX (and other Schwab money markets) can be found on Schwab’s money market page.
SNAXX Details
The expense ratio is .19% for the ultra shares and .34% for the investor shares. Neither fund charges a load or 12b-1 fees.
SNAXX has a minimum investment of $1 million. My observation is that investors can keep SNAXX 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 SNAXX is generally only available to clients of Charles Schwab.
Like most money market mutual funds, investors can sell SNAXX at any time.
SNAXX Risks
Hypothetically, an investor could lose money with SNAXX, 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 SNAXX though.
As of June 30, 2023, the fund had nearly $210 billion in net assets. This was composed of approximately $130 billion in the investor shares and $80 billion in ultra shares.
Is SNAXX FDIC Insured?
No, neither SNAXX nor most money market mutual funds are FDIC insured.
Holdings
The largest holding is repurchase agreements (repos) at 42.6%, followed by CDs at 24.5%, and commercial paper at 18.4%. The vast majority of the fund’s holdings have a maturity of less than one week (81%).
Low Balances
Investors allocating less than $1 million may want to consider the “investor” share class of the fund, whose symbol is SWVXX.
Tax Considerations
SNAXX is a “prime fund” which means that it can invest in both government and non-government financial instruments. However, taxable investors may find better after-tax yields in government or municipal (muni) money market funds, both of which offer tax benefits that may improve investors’ after-tax yield.
Government and Treasury Money Market Funds
Most states have an income tax. However, interest from Treasuries is exempt from state tax. Therefore, investors in states with income tax may be better off with a government money market fund that only invests in government-backed securities.
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.
Is SNAXX a Good Investment?
Overall, SNAXX is a good investment for many situations (and I have used it many times). Those investing high balances or those who are subject to high tax rates may want to consider other funds though.
