In this past weekend's "Up and Down Wall Street" column, Randall Forsyth added a portion on fee wars and money market funds. In the segment, "Fidelity's Freebies Don't Include Money Funds," he writes, "Last week, perhaps while you were imbibing your bottled water, Fidelity Investments launched index funds with no purchase minimum and zero expenses.... But the price war hasn't spread to one sector: money-market funds. Their expense ratios remain far higher than the rock-bottom costs of index funds, since there seems to be little competition to induce issuers to provide higher yields (although Interactive Brokers Group [IBKR] touts the rates it pays on customers' cash balances). Nobody cared about money-fund yields when the Fed was pinning short-term interest rates near zero in the wake of the financial crisis (and when fund companies had to absorb these funds' expenses in order to keep their yields at zero or slightly positive). But now that the central bank has lifted its fed-funds target range to 1.75%-2%, money markets are competitive with the 1.8% dividend yield on the S&P 500. Fidelity Government Cash Reserves (FDRXX), the default cash account for Fidelity brokerage customers, yields 1.61%, after an expense ratio of 0.37% of assets. Viewed another way, expenses equal 23% of this fund's income. Well-heeled customers with $100,000 or more can earn 1.96% in Fidelity Money Market Fund - Premium Class (FZDXX), which carries an expense ratio of 0.37%, equal to 19% of its yield. There's another freebie that's relatively less advertised: U.S. Treasury securities. You can purchase them at auctions straight from Uncle Sam at TreasuryDirect.gov. And some discount brokers -- including Fidelity, Schwab, Vanguard, and E*TRADE -- also charge zip for both online purchases of Treasuries at auctions and secondary-market transactions. (Broker-assisted trades do cost something, as in the old days.) Treasury bills yield significantly more than money funds and have tax advantages. Four-week T-bills on Thursday yielded 1.881%; three-month bills, 2.007%; and six-month bills, 2.206%. And they are exempt from state and local income taxes, which is worth something to residents of California, New York, New Jersey, and other high-tax states, now limited to deducting just $10,000 in state and local taxes from their federal taxes. Interest on T-bills is paid at maturity, so the interest on a bill due in 2019 will be part of that year's income, not 2018's. Of course, individual investors might find it less convenient and profitable if they must sell their Treasury bills before maturity, perhaps to jump on an investment opportunity. In that case, the money funds' expenses would be worth paying. But to set cash aside that won't be touched for a while, Uncle Sam pays more than money funds. And that can add up to enough to purchase cases of spring water, or maybe something more pleasurable."

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