Charles Schwab started offering AMT tax-free money market funds. I read about it in the spring 2008 edition of Schwab’s On Investing magazine. AMT tax-free money market funds are good for investors who are in a higher tax bracket due to the Alternative Minimum Tax, especially those who also face high state income tax.
Previously Fidelity is the only place I know that offers this kind of funds. Schwab now offers one national and four state-specific (CA, MA, NJ, and NY) AMT tax-free money market funds. The national fund and the NY fund also have two share classes with different expense ratios. The Value Advantage share class is cheaper but you can’t use them for automatic sweeps. Investors in MA and NJ only have the more expensive Sweep Shares version, while investors in CA only have the non-sweep version. Like the comparable Fidelity funds, these AMT tax-free money market funds all require a $25,000 minimum initial investment.
Here’s the complete list of Schwab’s AMT-free money funds*:
|Schwab AMT Tax-Free Money Fund – Value Advantage Shares (SWWXX)||0.45%||2.80%||0.43% / 2.83%|
|Schwab AMT Tax-Free Money Fund (SWFXX)||0.63%||2.61%||N/A|
Schwab CA AMT Tax-Free Money Fund – Value Advantage Shares (SNKXX)
|0.45%||2.42%||0.30% / 2.76%|
|Schwab MA AMT Tax-Free Money Fund – Sweep Shares (SWDXX)||0.65%||2.64%||0.30% / 2.72%|
|Schwab NJ AMT Tax-Free Money Fund – Sweep Shares (SWJXX)||0.65%||2.64%||0.30% / 2.95%|
Schwab NY AMT Tax-Free Money Fund – Value Advantage Shares (SWYXX)
|0.45%||2.68%||0.30% / 2.95%|
|Schwab NY AMT Tax-Free Money Fund – Sweep Shares (SWNXX)||0.65%||2.47%||N/A|
* Expense ratios and effective yields for the Schwab funds were from Schwab’s web site: sweep funds, purchased funds. Expense ratios and effective yields for the Fidelity funds were from Fidelity’s web site. All data were retrieved on Saturday March 8, 2008.
Except for the national fund, Schwab’s AMT tax-free money market funds all have a substantially higher expense ratio and a lower yield than the comparable Fidelity funds. But if you prefer to keep your money at Schwab, now you have some new options for your short-term cash.