Admittedly, Tangerine investment funds are more expensive compared to robo advisors or ETFs, but I still think they’re a great product. Keep reading my Tangerine investment funds review and find out why they may be a good fit for you.

What are index funds?

Index funds are funds 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 or prevent any losses, but in reality, no one can predict the future.

Becoming an index investor over the years has become quite popular since people are starting to understand how fees can eat at your returns over time. For reference, all of Tangerine’s investment funds have a management expense ratio (MER) of 1.07%, whereas mutual funds charge an average MER of 2.5%. That’s a huge saving over your investment lifetime. Like tens if not hundreds of thousands of dollars.

There are five diversified portfolios available to investors with Tangerinewhich 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 about how they all stack up, here’s my Tangerine investment funds review.

Tangerine Balanced Income Portfolio

• Fund code: INI210
• MER: 1.07%
• 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.

New investors who may not be knowledgeable might lean towards a safe portfolio, but if you’re young, you really should be using a portfolio that has a higher allocation towards stocks. Even if the markets drop, you’ll have plenty of time to recover.

Tangerine Balanced Portfolio

• Fund code: INI220
• MER: 1.07%
• 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.

Traditionally, this portfolio would appeal to people who are in their 40’s as one rule of thumb is that the bonds in your portfolio should match your age. However, since people are living longer, and you could still be investing for 20+ years when you retire, this asset allocation is becoming a more popular choice for people in their 50’s or 60’s.

Tangerine Balanced Growth Portfolio

• Fund code: INI230
• MER: 1.07%
• 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. You’re getting a lot of exposure to stocks so there’s a lot of potential for growth. This portfolio also has an equity allocation spread around the world so there’s no home base bias.

Tangerine Equity Growth Portfolio

• Fund code: INI240
• MER: 1.07%
• Risk Factor: Risky

This is Tangerine’s riskiest fund. There are no bonds to balance the fund out during down markets. Risky might be a loose term as it still makes sense for a lot of people.

Someone in their 20’s who has 40+ years to invest will likely have no problem starting with this portfolio. Alternatively, if you have a pension plan from work or you want to take a more aggressive approach in your TFSA, this portfolio could be a good choice.

Tangerine Dividend Portfolio

• Fund code: INI235
• MER: 1.07%
• 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

PROS

• Low Management Expense Ratio (MER)
• No account or trading fees
• No minimum investment required.
• Auto Rebalancing

CONS

• 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 has 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.

How do Tangerine investment funds compare to others

If you invest on your own 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 account fees, but the overall lower MER still make it worth your while. Basically, you could replicate the Tangerine investment funds at a fraction of the cost.

For many people, investing their own money is not something they’re interested in at all. Fortunately, robo advisors are a good option. Many of the top robo advisors in Canada including Justwealth, Wealthsimple, WealthBar (now CI Direct Investing), Nest Wealth and RBC InvestEase charge fees in the .50 -.90 range so if you invest with them, you could save a bit more on your MER. In addition, most of those robo advisors have a special promo where you can some of your portfolio managed for free when using my referral link.

If robo advisors are cheaper, then why do people use Tangerine investment funds? Well, since Tangerine is owned by Scotiabank, many people prefer to use them. They like to know that their money is with a major Canadian bank. The other obvious comparison is the new Tangerine ETFs which are Tangerine’s version of all-in-one ETFs.

I personally don’t think it matters if you DIY, use a robo advisor or Tangerine investment funds. They’re all good options since the fees you pay will be much lower than traditional mutual funds.

Final thoughts

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 to open an 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.

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

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.

Wealthsimple, Justwealth and Nest Wealth 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.

Final thoughts

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.