I have a Fidelity BrokerageLink option through my employer’s 401(k) plan, which allows me to invest in Shariah-compliant ETFs and mutual funds. However, I’m facing a challenge: when funds are transferred from my 401(k) to my BrokerageLink account, they automatically go into the Fidelity Government Cash Reserves core position, which earns about 4.5% interest. This happens until I can move them into a Shariah-compliant investment, which might take a day or two.
How do you manage this situation? I’m concerned about the interest earned in the interim. Any advice or strategies you use in a similar scenario would be greatly appreciated.
Unfortunately, I don’t think there’s a way around this. You can try reaching out to Fidelity and say you want to avoid earning interest for religious reasons, but in my experience, it’s rare for them to make exceptions. It’s still worth a shot, though. Best to just invest the cash as quickly as possible to minimize any interest accrual. If you still end up with some interest at the end of the year, just donate it.
Thanks, Saad. I figured out that if I invest in a mutual fund, I can set up automatic investments, unlike with ETFs, because mutual funds have a fixed price for the entire day. My plan is to start with Amana funds and probably avoid ETFs until I get a better understanding of how things work.
PS: I did talk to fidelity about the interest but they said they can’t do anything about it
Thanks