My mother in law recently met with a rep from Chase Bank regarding opening a Conservative Money Market account. She was told that if she invests $100,000.00, they can do a managed market account. There would be a yearly fee of 1.144% yearly for managing the fund. She can opt out after one year with no penalty. This fund would consist of approximately 70% bonds and 30% stocks. She could also just do Money Market Fund that is not managed by Chase. Please advise which of these options is better, or is there a better way for her to invest her money. The rep said on average the fund will make 4 to 5% yearly,and at most may lose up to 3 to 4%. Is that a true staement? I look forward to your reply. Thank you for your help. Phil
SAVAGE SAYS: What???? Either your mother-in-law didn’t understand or you don’t — and this is very dangerous! A “money market” account is a short term, safe investment that is paying less than one quarter of one percent these days. A MANAGED ACCOUNT in stocks & bonds is something quite different. There is risk of loss, in both the stocks and the bonds. And NO ONE should/can guarantee that she will make 4-5% yearly, or that the most she would lose is 3-4%. That is outrageous. And even more outrageous is the fee structure. She could invest in a good equity/income fund from T. Rowe Price or Fidelity and pay less than half of one percent a year in fees!
Actually, I am so offended by the idea that anyone representing Chase (and by the way, this is an investment firm WITHIN Chase, not the bank itself) that I wish you would send me an email to Terry@TerrySavage.com, giving me the name, phone number and email address of the broker who talked with your mother-in law. I would like to contact that person, or his superiors, if I can verify that he/she made these outrageous claims!
My suggestion is to ask your mother-in-law how much of this money she can afford to lose! If the answer is ZERO, then she should stick with short term FDIC insured CDs, paying almost nothing these days. That’s the only way to insure against loss. And if she is in a position to take a bit more risk, in order to have the possibility (NOT guarantee) of a potential gain, then she should use one of the mutual funds mentioned above. But in either case, she needs to speak to someone not trying to sell her something!!