Forget about me, what did you learn from financial literacy month? Is there something that really stuck with you? Have you decided it’s time to take control of your finances? The one question that I was asked a lot this month was; how did I get over the fear of becoming a do-it-yourself investor? I usually respond with I just educated myself until I was ready, but I realize this isn’t the answer for everyone.
I was screwed by my old financial advisor and that was the kick in the butt I needed to go DIY. I wanted to manage things myself since no one would care more about my money than me. It worked out for me since I’m not really an emotional investor, but I admit I have made mistakes along the way.
Many people want to get into DIY investing, but are still intimidated by the process. Don’t worry there’s nothing wrong with enlisting some help since the whole point is to reduce your fees, and to keep your investments simple.
Tangerine Investment Funds
As many people here know, I’m an index investor and I use the couch potato strategy. This method works for me because I’m disciplined and I don’t mind taking 5 minutes of my time every year to re-balance. If you want absolutely nothing to do with your investments then the Tangerine Investment Funds are for you.
The Tangerine investment funds are index mutual funds. You pay a higher management expense ratio of 1.07% compared to (.20 – .50%) if you did it yourself, but what you get is convenience. The difference in MER can be significant, but it doesn’t take away the fact that these funds are great since it requires zero effort from the investor. Simply deposit your money on a regular basis and Tangerine will take care of the rest.
There are only 4 portfolios available and which one you’re recommended is based on your risk profile.
- Tangerine Balanced Income Portfolio
- Tangerine Balanced Portfolio
- Tangerine Balanced Growth Portfolio
- Tangerine Equity Growth Portfolio
Even at 1.07%, there’s a lot of value here for investors who want to index without having to worry about maintenance.
Robo-advisors are aimed at people who are interested in paying lower fees, but still need a little bit of help to get everything going. Although the name implies everything is done via robots, there is human interaction if you desire; it just won’t always be done in person. Just about everything can be done online, through the app, or even over the phone, making robo-advisors appealing for those who are tech savvy.
Nest Wealth, Portfolio IQ, Wealthsimple, and WealthBar are just some of the companies you work with. To get started, fiill out their questionnaire, and a custom asset allocation will be created for you. There’s nothing stopping you from taking that recommended allocation and investing on your own via ETFs or index funds, but there are advantages of working with robo-advisors.
The custom portfolio tends to be the biggest draw. Plus there’s no rebalancing required on your end, everything is done automatically based on their algorithms. If you ever have any questions about your portfolio, you can always talk to a real person via webchat or phone. Fees are reasonable since ETFs are used to build your portfolio. There is additional fee based on your portfolio size that you have to pay on top of the standard MERs, however the more you have invested, the less of a percentage in fees you pay. In the end the overall cost to you falls somewhere between DIY and using Tangerine investment funds.
Assuming the robo-advisor you’re working with is partnered with a member of the Canadian Investor Protection Fund (CIPF) and you meet all required qualifications, your account would be eligible for up to $1 million in coverage by the CIPF, in the event the CIPF member firm goes bust.
I used to think that anyone could start DIY investing on their own since it’s so easy, but I recognize now that it’s really not that simple. Some people have zero interest in managing their money and would rather pay a fee, while others get intimidated by the entire process. If you’re first starting off don’t be afraid to seek out some help, but also remember that financial planning and investment management are not the same.