Is this Money Market Fund giving negative yield?

Question

I had a question about interpreting money market fund metrics that was answered here, but which raised a new question.
Schwab SWVXX is a money market fund which has a Gross Expense Ratio of 0.34% and a 7-day Yield of 0.03%. As I understand it, the gross expense ratio acts upon the full amount of money in the account and not just the gains, and the 7-day yield is an estimate annualized yield and not actually the yield received every 7 days.
Given this, assuming I put $100 into SWVXX, at the end of the year wouldn't I gain $0.03 at the cost of $0.34, yielding -$0.31? Or am I missing something here?

Justin Cave · Accepted Answer

If you look at the page you linked to, there are two different 7-Day Yield numbers, one with and one without waivers

7-Day Yield (with waivers) As of 12/08/2020
0.03%

7-Day Yield (without waivers) As of 12/08/2020
-0.17%

Yields are normally given after expenses.  Realistically, this fund yield over the last 7 days was 0.17% before expenses.  Had Schwab charged the full expense ratio, you would have lost 0.17% after expenses.  Schwab (and realistically every other money market fund provider) waives some of their fees on money market funds when interest rates are as low as they are today in order to ensure that investors don't lose money.  So realistically, Schwab waved 0.2% of their fees, charged 0.14%, and the 0.17% yield before expenses became 0.03% after expenses.

Is this Money Market Fund giving negative yield?

One Answer

Add your own answers!

Ask a Question