When building an investment portfolio, most investors choose to work with a brokerage platform offering access to a wide range of assets. In general, Charles Schwab and Fidelity are known for offering access to a broad selection of Exchange Traded Funds (ETFs) through their platforms.
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But in a somewhat surprising move, both of these brokerages blocked access for clients to purchase three specific ETFs. Here’s what you need to know.
Fidelity and Charles Schwab each blocked the following ETFs:
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iShares Government Money Market ETF (GMMF)
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iShares Prime Money Market ETF (PMMF)
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Texas Capital Government Money Market ETF (MMKT)
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These three ETFs track a different selection of money-market securities, including Treasury bills and government-backed debt. The iShares ETFs were issued by BlackRock and the third ETF was issued by Texas Capital.
In recent years, investors have shown an interest in money markets. The elevated interest is likely due to the recent economic conditions, including the Federal Reserve’s decision to increase rates dramatically in an effort to tame inflation. The rising rate environment pushed short-term rates over 5%. More recently, the interest rate policy has led to declining interest rates but investors seem to still feel strongly about putting money into money market funds.
Whether or not this style of ETF should be in your portfolio varies based on your goals and risk tolerance. Take the time to decide on the right asset allocation before jumping into any new changes with your investment portfolio.
It’s rather unexpected for Fidelity and Charles Schwab to block their investors from purchasing an ETF. But these three ETFs track money-market mutual funds.
Recently, Fidelity and Charles Schwab each released their own government money-market ETFs. With that, it’s likely that Charles Schwab and Fidelity blocked their investors from purchasing these particular ETFs because they compete directly with their own version of this mutual fund.
Brokerage platforms have the ability to choose what investors can and cannot purchase through their platform. It seems natural that these large brokerages wouldn’t want to place a competitor’s ETFS onto their own platform. After all, they prefer investors interested in that type of mutual fund purchase the version offered by the respective brokerage platform.
