5 Reasons SGOV May Outperform a Money Market Fund

SGOV can be a more efficient alternative to a standard money market fund. These are the top five reasons to consider moving your cash into SGOV if you have cash in a taxable brokerage account.

1. Higher State Tax Efficiency:

   • SGOV holds 100% U.S. Treasury bills, making its interest income generally exempt from state and local taxes in most states.

   • Many money market funds (like "Prime" MMFs) hold non-government debt (e.g., CDs, commercial paper) and are fully taxable at the state level.
     

2. Lower Management Fees:

   • SGOV has an extremely low expense ratio of 0.09%.

   • The average retail money market fund typically charges over 0.30%, which eats directly into your yield.
     

3. Intraday Liquidity:

   • As an ETF, SGOV can be bought and sold instantly during stock market hours.

   • Money market funds typically only transact once per day after the market closes.
     

4. No Minimum Investment:

   • You can buy SGOV for the price of a single share (currently ~$100) at any brokerage.
     While many retail MMFs have low minimums, "Institutional" MMFs with the best yields often require $1 million or more to open an account.
     

5. Yield Transparency:
   SGOV's portfolio is fully transparent, holding a specific basket of T-bills with maturities under 3 months.
   Money market funds often have more complex, actively managed portfolios that may include slightly riskier private-sector debt to chase yield.

Summary:

SGOV is for the trader who wants their cash to work as hard as their stocks, with the ability to move into a new position in seconds. Under federal law, interest on U.S. Treasury obligations is exempt from state and local taxes. Because it holds 100% Treasury bills, typically 100% of its distributions qualify for this exemption.

(In some states, such as California, New York, and Connecticut, the fund must meet specific criteria (which SGOV typically does) for the exemption to apply.)