Chase You Invest is a win for investors, and millennials should take advantage

I was all set to break up with Chase (JPM) after almost 20 years. I had finally had enough of their terrible, barren savings accounts, their bad customer service and having to jerry-rig my account seven different ways to avoid their account maintenance fees. But then I heard about their new You Invest program and I forgot all about my issues with my long-time bank.

Chase’s You Invest program is the latest and so-far greatest example of companies asking, “What do people want?” and answering, “Free stuff.” For the price of zero dollars a year, you can sign up for the bank’s You Invest program and get 100 free trades. If you invest $15,000 you get free trades for a full year. (If you don’t have $15,000 to invest you shouldn’t be making anywhere near 100 trades a year anyway.)

What’s the catch? The Free-99 promotion only applies to Chase customers and only for electronically traded funds (ETFs). It’s also an unsettled question whether Chase can continue to offer ETF trading for free indefinitely. Still, this is a stupidly good deal for customers.

It’s like MoviePass used to be, except for with ETFs instead of movies and for $0 a month instead of $9.95 or $14.95 or whatever MoviePass costs now. And they’re not paying me to say this. This is just a good deal, unlike their previous brokerage options.

Bonds purchased through You Invest cost just $1 per bond and there’s no transaction fees on mutual funds. And even if you hit 100 trades and don’t have $15,000 invested, you only pay $2.95 per trade, which is cheaper than every other bank’s brokerage offering.

J.P. Morgan, the biggest U.S. bank, has a distinct advantage over competitors, including start-ups with slick trading apps: It already has financial ties with half of American households.

Is this a good deal? It’s a great deal.

When I first started buying stocks back in 2008, I paid a broker 40 bucks a trade. That meant $40 every time I bought or sold anything in addition to the cost of the security. It was even worse when it came to buying mutual funds. There were upfront load fees, hefty management fees of 1% or more, plus back end fees and gobs of others we didn’t even know about.

Paying fees every year may not sound like much, but as your money grows over time – the whole point of this exercise – the difference in fees really starts to make a huge difference. For example, just a 1% fee can cost a lot of money compared to ETFs.

Today the average ETF carries an expense ratio of 0.44%. That means funds cost $4.40 in annual fees for every $1,000 you invest and the majority have no other expenses. Many ETFs carry fees as low as 0.03%, meaning you pay just 30 cents for every $1,000 invested.

If you start with Chase’s one-year-free-minimum of $15,000 and add just $200 a month for 30 years, earning 8% returns (less than the average return for the S&P 500 over the last 98 years), you end up saving $80,000 just from the fees. And it’s been proven that over time even the best fund managers don’t beat the S&P. That’s a major reason Wall Street has cost American taxpayers $600 billion over the last decade.

I made the mistake of putting money in Chase’s brokerage accounts years ago and got swindled for what must have been thousands of dollars in fees and underperformance. For savvy investors those days are now over.

The $3.5 trillion ETF fund industry exists at this point almost entirely as a price war.

ETFs are also a great way to invest because they provide the opportunity to either buy a diversified fund – one consisting of stocks, bonds, commodities and other instruments all in one like BlackRock’s iShares Core Growth Allocation ETF – or a cheap and easy way to build a diverse portfolio by buying multiple ETFs.

Unfortunately, this does little to help people who have no idea what to invest in or how to invest in the first place. Teaching basic financial literacy isn’t included in the 100 free trades. Chase is rolling out a “Portfolios” option to remedy this, but details are minimal and it’s like to carry a price tag that isn’t free.

However, the knowledge is out there and a little research on sites like Yahoo Finance or Investopedia will ensure that 80 grand goes toward your retirement and not a down payment on Mr. Fund Manager’s second house in the Hamptons.

See also:

Wall Street managers have cost Americans more than $600 billion over the past decade

It’s the end of the world as we know it, and investors feel bullish

A Trump trade war victory over China could be disastrous for the US

What the collapse of Turkey’s currency means for the US and the rest of the world

Dion Rabouin is a global markets reporter for Yahoo Finance. Follow him on Twitter: @DionRabouin.

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