**Disclosure, I have done work with Tangerine before, but I received no financial compensation for this post. All opinions are my own
Tangerine recently updated one of their investment funds and added a new one to their roster, so it was time to update this post. From a straight investing standpoint, the funds are still one of the best ways to become an index investor without any hassle. Yes, there are cheaper options available (which I’ll touch on later), but with the Tangerine funds, you can start indexing right away for a low cost.
All of Tangerine’s investment funds have a management expense ratio (MER) of 1.07%, whereas standard mutual funds charge an MER around 2.5%. That’s a huge savings over your investment lifetime.
What are index funds?
Index funds are essentially a type of mutual fund where its holdings are meant to match a certain market index. Since an index comprises of the stock of thousands of companies, it allows an investor to be well diversified. There are many different indexes, but the Tangerine investment funds try to mimic the following indexes.
- FTSE TMX Canada Universe Bond Index – Canadian Bonds
- S&P/TSX 60 Index – Canadian Stocks
- S&P 500 Index – US Stocks
- MSCI EAFE (Europe, Australasia and Far East) Index – International Stocks
Don’t worry if you didn’t understand a word of the above, all you need to know is that index investing allows you to own the entire market as opposed to individual stocks. This benefits you as an investor since it has been proven that 80% of the time active management doesn’t beat the indexes.
It’s true that 20% of the time mutual funds do beat the index, but there’s no guarantee that you’ll be invested in the right fund. Plus past performance is not an indicator of future outcomes. Some investment advisors claim that their active style will guarantee returns, but in reality, no one can predict the future.
There are four diversified portfolios available to investors which range from safe to risky. To find out which portfolio is right for you, you’ll be asked a series of questions to determine your investor profile before a recommendation is made. If you’re curious of how they all stack up, here’s my Tangerine Investment Funds review.
Fund code: INI210
Risk Factor: Low
Of all the investment funds available from Tangerine, the Balanced Income Fund is the safest for investors since it has 70% in bonds.
There is still some minor growth potential since 30% of your portfolio is invested in equities but this fund is aimed at people who aren’t looking for many risks.
Fund code: INI220
Risk Factor: Low – Moderate
As the name implies, the Balanced portfolio offers a balance between fixed income and equities. This will allow your portfolio to grow while still maintaining stability.
This may sound appealing to novice investors, but it’s better geared towards people in their 40’s or 50’s who are slowly preparing their portfolio for their retirement years.
Fund code: INI230
Risk Factor: Moderate
With an even allocation between Canadian bonds, Canadian stocks, U.S. stocks, and International stocks, this is the perfect portfolio for investors in their 20’s and 30’s.
The portfolio has 75% in equities which is great for long-term growth while the remaining 25% in fixed income will help provide some stability.
Fund code: INI240
Risk Factor: Risky
This is Tangerine’s riskiest fund. There are no bonds to balance the fund out during down markets.
This fund was recently updated to address customer concerns. Before there was a heavy home country bias at 50%, but now the three indexes are evenly split at 33.3% each. If you’re okay with everything being all equities, this is a good fund.
Fund code: INI235
Risk Factor: N/A
This is Tangerine’s newest fund. It started in late November of 2016, so it doesn’t have much history. However, it tracks the MSCI Canada High Dividend Yield Index, the MSCI USA High Dividend Yield Index, and the MSCI EAFE High Dividend Yield Index which have been around for a while.
If you’re looking for a dividend paying Tangerine fund, this is the one for you. Distributions are paid out annually in December.
Tangerine investment funds review
- Low Management Expense Ratio (MER)
- No account or trading fees
- No minimum investment required.
- Auto Rebalancing
- Not the cheapest option (MER)
- Limited to 5 Investments funds
- Unable to modify asset allocation
The Tangerine investment funds are attractive to new investors since all you need to do is deposit your money and Tangerine will take care of everything. You can also set up an automatic saving plan with the funds, so you can just set it and forget it. There are no additional fees and you can purchase the Tangerine investment funds in your RRSP, TFSA, and regular account.
The recent change to the equity growth fund and the addition of the dividend portfolio have addressed the concerns of investors. All things considered, the 1.07% MER is reasonable for people who want to index without becoming a do-it-yourself investor.
That being said, if you do become a DIY investor and use the Couch Potato Strategy, you could easily bring your MER down to .2% using ETFs or .5% with TD e-Series funds. These options require a little more work, but you get complete control over your asset allocation. You may end up paying trading and accounts fees, but the overall lower MER still make it worth your while.
Alternatively, robo-advisors have become pretty popular since they offer low fees for a portfolio that’s managed automatically. In essence, Tangerine index funds are similar to robo-advisors but they charge a little more. For example, Justwealth’s fees are about .70% which is .37% less than what Tangerine charges.
All things considered, my Tangerine investment funds review is positive. If you’re looking for an easy way to invest but are not confident in becoming a DIY investor, then the Tangerine funds are a very good option. If you have an interest in investing and prefer a little more control over then go with TD e-Series, Questrade, or robo-advisors.
Remember you could always start with Tangerine and then switch later, the point is to start investing early and avoid high-cost mutual funds. If you want to start investing in the Tangerine investment funds, use my referral links to set up a chequing or savings account and start saving now. Even if you decide to go with a different company for your investments, don’t forget that Tangerine has one of the best rates for high interest savings accounts in Canada.