Tangerine’s line of investment funds are one of the choices investors have if they want to purchase index funds. Investing for newbies has never been easier. These days, you can DIY by opening a discount brokerage account where you directly purchase ETFs and Stocks. If you are not ready to go all-in with a DIY approach, other alternatives that demand less personal involvement and which also offer lower management fees (than traditional mutual funds) are indexing and investing via robo-advisors.

Speaking of investing fees, the investor who is willing and able to venture outside of traditional investment approaches can potentially improve their long-term returns (significantly) by cutting the management fees they pay. Markets wax and wane, and investment returns are not guaranteed. However, fees play a significant role in determining the real returns generated in your portfolio, and which continue to grow to boost your net worth. The less you can pay in fees to derive market returns, the better.

To recap, Canadian newbie investors can use these three options to invest their money outside of traditional mutual funds:

Tangerine Investment Funds

Tangerine have five funds that are designed to replicate the performance of specific market indexes. Investors can choose one or a combination of funds based on their risk tolerance, return expectations, and other investment objectives. Each fund is globally-diversified and their MER is 1.07%. The five (5) investment funds are as follows:

A. Tangerine Balanced Income Portfolio (INI210)

This fund is heavily weighted in bonds (70%) as opposed to stocks (30%). It provides safety for investors who do not want to hold onto a portfolio with lots of fluctuations going on and seeks to replicate the following market indexes:

  • Canadian Bonds (70%) → FTSE TMX Canada Universe Bond Index
  • Canadian Stocks (10%) → S&P/TSX 60 Index
  • U.S. Stocks (10%) → S&P 500 Index
  • International Stocks (10%) → MSCI EAFE Index

The fund has a risk rating of “low to medium”, and its average performance* since inception is 4.35%. It’s MER is 1.07%.

*Note: Past fund performance is not a guarantee of future results.

B. Tangerine Balanced Portfolio (INI220)

This fund holds a fair balance of bonds (40%) and stocks (60%). It is designed for investors who want to potentially generate more growth in their portfolio through stocks without facing the higher level of volatility that is normally experienced with an all-equity fund. Its asset allocation is as follows:

  • Canadian bonds (40%)
  • Canadian stocks (20%)
  • US stocks (20%)
  • International stocks (20%)

The market indexes being tracked are the same as for the Balanced Income Portfolio. This fund has a risk level rating of “low to medium” and average returns since inception is 5.12%.

C. Tangerine Balanced Growth Portfolio (INI230)

Tangerine’s Balanced Growth Portfolio holds more stocks (75%) than bonds (25%). It is great for investors who are willing to ride the tide of volatility and who have time on their side to make the most equity growth. Its asset allocation consists of:

  • Canadian bonds: 25%
  • Canadian stocks: 25%
  • US stocks: 25%
  • International stocks: 25%

This fund’s risk level is rated at a “medium” and average returns since inception is 5.55%.

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D. Tangerine Equity Growth Portfolio (INI240)

Their Equity Growth Portfolio is fully invested in stocks (100%). An all-equity investment comes with its risks and rewards. Stocks have historically generated the most returns of all major investment asset classes over the long-term. However, in the short-term, they may be subject to extreme ups and downs, and to make money, you should be willing to stay the course. This fund’s asset holdings are as follows:

  • Canadian stocks: 33.4%
  • US stocks: 33.3%
  • International stocks: 33.3%

It is rated higher on the risk scale as “medium to high”. Its average performance since inception is 11.36%.

E. Tangerine Dividend Portfolio (INI235)

This fund is aimed at investors who desire a portfolio heavily-weighted in dividend-paying stocks. The fund’s asset holdings and the market index they track are as follows:

  • Canadian Dividend stocks (50%) → MSCI Canada High Dividend Yield Index
  • US Dividend stocks (25%) → MSCI USA High Dividend Yield Index
  • International Dividend stocks (25%) → MSCI EAFE High Dividend Yield Index

This fund has a risk rating of “medium” and its average performance to date is 7.86%.

Related: Tangerine Bank – Zero Monthly Chequing and Savings Account Fees

Advantages of Tangerine Investment (Index) Funds

Index funds offer advantages that are somewhat similar to investing with a robo-advisor. These include:

Diversification: Building a diversified portfolio through buying individual stocks and/or bonds is not easy. These index funds are pre-designed to be globally-diversified, so you don’t have to worry about too much local concentration or home bias.

Low Cost: Average index fund fees are not yet as competitive as ETFs, however, they are much more competitive than comparative mutual funds. Fees are important, and since studies show that 80% of active mutual funds do not beat their market index, we continue to see an outflow of funds from mutual funds year after year.

Automated Investing and Rebalancing: Tangerine funds are easy to invest in. Heck, you can set up an automated investing plan where a specific amount of money (as little as $25) is deposited in your investment account on a schedule – set it and forget. This automated investing helps you to stay invested at all times and use dollar-cost-averaging to your advantage. It also makes you less subject to your behavioural biases. In addition, you do not have to get your hands dirty in order to rebalance your portfolio as it is done automatically on your behalf.

Low Minimum Investment: You can open an account with as little as $100, which means investors with a small account balance have an option outside of mutual funds. The Canadian Couch Potato strategy recommends a portfolio of at least $50,000 if you want to invest using a discount brokerage account.

Disadvantages of Tangerine Investment Funds

Cost: While the Tangerine investment funds are not ridiculously expensive at 1.07% (compared to an average 2.23% for equity mutual funds), there are cheaper alternatives. For instance, the average robo-advisor fee is around 0.75% (including ETF fees). With the DIY option, you can purchase standalone ETFs with MERs as low as 0.06%. However, with this option, you pay commissions when you trade (up to $10 per trade) which can add up to become significant if you trade frequently.

Flexibility: What you see is what you get. If you want a broader choice of funds, you may have to look elsewhere.

Investment Fee Comparison: Tangerine Funds vs. Robo-Advisors vs. Mutual Funds vs. DIY Investing

This is a simplified example to throw some light on how fees impact your investments. Note that other fees not included here may apply.

Let us assume you have a portfolio with investable assets worth $100,000. Your annual fees could easily look as follows:

  • Tangerine Investment Funds: at 1.10% annual fees (after adding MER of 1.07% + 0.03% trading fees) = $1,100 per year in fees
  • Robo-Advisors: at an average fee of 0.75% (including ETF fees) = $750 per year in fees
  • Equity Mutual Funds: at 2.23% MER = $2,230 per year in fees!!
  • Self-Directed (DIY) investing: using an average of 0.25% MER (approx. for Vanguard’s Conservative, Balanced, or Growth ETF portfolios) = $250 (excluding trading commissions)

Tangerine Bonus Offer

I have written a lot about the cost of investment and banking fees in Canada. Tangerine Bank is one of my top choices when I refer friends who need a No-Fee Chequing and High-Interest Savings Accounts. As a bonus, Tangerine is currently offering:

High-Interest Savings Account: A $50 cash bonus (with this link) when you open a new savings account with them and fund it with at least $100. This can be a general savings, TFSA, or RRSP account. New clients get a top savings rate of 3% for 6 months.

No-Fee Chequing Account: A $200 total cash bonus (with this link) when you open a new no-fee chequing account and fund it with at least $100 (receive $50 bonus) plus switch your payroll or preauthorized payments to Tangerine (receive $150 bonus). Unlike the traditional chequing account, Tangerine will pay you interest on your chequing account balance as well!

Conclusion

I consider Tangerine Investment Funds to be a viable option for investors who want to lower their investment fees, but are not yet ready or able to go the DIY route. Another group of funds I have used and recommend in the index category are the TD e-Series Funds. If you are interested in additional low-cost portfolio options, check out this list on Canadian Couch Potato.

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