Are you looking for a Tangerine ETF review? Exchange traded funds (ETFs) are something Tangerine clients have been asking for years. Considering the fact that Tangerine was one of the first out of the gate with their index fund portfolios, it’s a bit shocking that it took them this long to introduce ETFs.
The new Tangerine Global ETF Portfolios are clearly designed to compete against robo advisors. You can purchase a single fund and have a diversified portfolio at a low cost. Although index investing can be a very simple process, you still need to understand what you’re getting into before you make any decisions with your money. Keep reading my Tangerine ETF review now to find out what they’re all about.
What are Tangerine ETFs?
An ETF is an investment product that can consist of stocks, bonds, and other investments. These products are chosen by an investment advisor, but ETFs follow a passive approach. What that means is that the investment decisions are based on the overall performance of an index. For example, an ETF could have a portion that tracks the S&P/TSX Composite Index (The benchmark index in Canada).
Since most of the decision making is made with algorithms, the cost to maintain the fund is quite low. That savings is passed onto consumers in the form of a lower management expense ratio (MER). For example, all Tangerine Global ETF Portfolios have an MER of just .77% (note when they were launched, they were advertised at .65%). Regular mutual funds have an average MER of 2.50%. Heck, even Tangerine’s investment funds have an MER of 1.07%. Switching to ETFs can save you a fair amount.
Tangerine Global ETF Portfolios actually combines various Scotiabank ETFs into a single product. This shouldn’t be a surprise since Scotiabank owns Tangerine. In essence, you’re actually buying Scotiabank ETFs, they’re just branded as Tangerine. This should matter very little to you as Scotiabank ETFs are a solid product. It’s also worth noting that despite the name, Tangerine ETFs are actually mutual funds as outlined on the landing page.
Right now there are three Tangerine ETFs available that are designed for different risk levels.
|Equity Growth||100%||0%||Medium to high|
|Balanced Growth||60%||40%||Low to medium|
If you’re a new investor, all you really need to know is that portfolios with more equities come with more risk. That’s because equities invest in riskier products such as stocks. Whereas fixed income is safer products such as bonds and term deposits. By taking on more risk, you have a greater chance at higher return. As I’ll explain below, picking a portfolio shouldn’t be just about your risk profile as you need to look at your individual situation.
Tangerine Equity Growth ETF Portfolio
The Tangerine Equity Growth ETF Portfolio has no bonds at all, so it’s the riskiest portfolio. While this may worry some new investors, it’s actually a good fit depending on your situation. Let’s say you’re in your early 20’s and you don’t plan on touching this money until you retire. Investing in an all equities portfolio at the start isn’t a terrible idea since you’ll have more than enough time to recover over the years. As you get older, you could switch to a more conservative portfolio.
Another instance when using the Tangerine Equity Growth ETF Portfolio makes sense is if you have a defined benefit pension from your employer. Since your pension acts as a portfolio of fixed income, you can afford to go 100% equities with your other investments. I personally use a 100% equities ETF in my TFSA, but in my RRSP, I have VGRO which is 75% equities and 25% fixed income.
In case you’re curious, as of March 31, 201 the Tangerine Equity Growth ETF Portfolio had the following holdings:
- Scotia U.S.U S Equity Index Tracker ETF – 57.41%
- Scotia International Equity Index Tracker ETF – 26.40%
- iShares Core MSCI Emerging Markets IMI Index ETF – 13.03%
- Scotia Canadian Large Cap Equity Index Tracker ETF – 2.84%
- Cash – 0.32%
Tangerine Balanced Growth ETF Portfolio
For most people reading my Tangerine ETF review, the Tangerine Balanced Growth ETF Portfolio will likely be all you need. With an asset mix of 75% equities and 25% fixed income, it’s the perfect balanced portfolio. You could invest in this fund and not have to worry about making any changes for decades.
Balanced portfolios are popular for an obvious reason; they’re balanced. With 100% equity portfolios, you can see huge drops during market downturns. If you went the low risk route, your returns would likely be low which is not ideal for younger investors. A balanced portfolio gives you the best of both worlds. You may not get the highest returns, but you’ll be well positioned if there’s ever a huge drop in stocks around the world. I personally recommend balanced portfolios to new investors who want to get started right away, but aren’t sure which fund to choose.
For those interested, as of March 31, 201 the Tangerine Balanced Growth ETF Portfolio had the following holdings:
- Scotia U.S.U S Equity Index Tracker ETF – 42.87%
- Scotia Canadian Bond Index Tracker ETF – 24.94%
- Scotia International Equity Index Tracker ETF – 19.71%
- iShares Core MSCI Emerging Markets IMI Index ETF – 9.73%
- Scotia Canadian Large Cap Equity Index Tracker ETF – 2.12%
- Cash – 0.62%
Tangerine Balanced ETF Portfolio
Finally, there’s the Tangerine Balanced ETF Portfolio which is the most conservative with an asset allocation of 60% equities and 40% fixed income. Some new investors may be attracted to this portfolio since it’s a low risk option, but that may not be the best idea. Most people who invest in ETFs are doing it for the long term, if you choose portfolios that aren’t very risky, then your gains will likely be lower. If you stick to this plan, you may not reach your saving goals.
While risk tolerance is certainly important, you need to think about when you actually need the money. If you don’t need it until you retire, then a low risk portfolio is not the best choice. That said, if you’re in your late 50s or 60s, then the Tangerine Balanced ETF Portfolio is definitely a good choice. When you invest, you need to think about what stage of life you’re in and what your personal financial standing is.
As of March 31, 201 the Tangerine Balanced ETF Portfolio had the following holdings:
- Scotia Canadian Bond Index Tracker ETF 40.09%
- Scotia U.S.U S Equity Index Tracker ETF 34.46%
- Scotia International Equity Index Tracker ETF 15.84%
- iShares Core MSCI Emerging Markets IMI Index ETF 7.82%
- Scotia Canadian Large Cap Equity Index Tracker ETF 1.71%
- Cash 0.08%
How much do Tangerine ETFs cost?
As mentioned, all of the Tangerine Global ETF Portfolios have an MER of .77%. While that’s not the cheapest option available, it’s significantly lower than mutual funds. Here’s how much you would pay on average every year if you were to invest in mutual funds, Tangerine ETFs, or on your own with ETFs.
|ETF||$1,000 invested||$10,000 invested||$100,000 invested|
|Mutual funds (2.5%)||$25||$250||$2,500|
|Tangerine ETFs (.77%)||$7.70||$77||$770|
As you can see, mutual funds are pretty expensive. That’s part of the reason why ETFs have become so popular over the years. Investors are tired of paying high fees, so ETFs are a good low cost alternative. If you took the time to invest on your own, you could lower your MER, but that would require a bit more work on your end.
It’s also worth noting that with Tangerine ETFs, you don’t pay any brokerage fees when you buy or sell. You only pay the MER. This could easily save you $10 every time you buy or sell some of your ETFs.
How Tangerine ETFs compare to others
Let’s be real for a second, the Tangerine Global ETF Portfolios were designed to compete with robo advisors such as Justwealth, Wealthsimple, and Nest Wealth. Robo advisors typically have an MER between .45%-.90%, so Tangerine ETFs are highly competitive. That said, Tangerine has fewer portfolio options than robo advisors.
To be fair, every robo advisor is more or less the same. However, they typically have one thing they excel at. Justwealth has a great option for those who want to set up a Registered Education Savings Plan. Over at RBC InvestEase, you can get socially responsible portfolios. With Tangerine ETFs, you’re getting a product that’s designed for their core users.
Now, if you’re comparing things to do-it-yourself investing, then Tangerine’s prices are still high. I use Vanguard’s All-Equity ETF Portfolio (VEQT) which is pretty much the same as Tangerine Equity Growth ETF Portfolio but has an MER of .25%. That’s ⅓ of what Tangerine charges. That said, I also need to factor in any brokerage fees.
How to invest in Tangerine ETFs
Tangerine global ETFs are available exclusively to Tangerine clients. That means you need to have a Tangerine account to purchase these funds. This shouldn’t be a deal breaker since it’s free to join Tangerine and you don’t pay any account fees. Once you’ve signed up, you can purchase Tangerine ETFs in the following accounts:
- Registered Retirement Savings Plan (RRSP)
- Tax-Free Savings Account (TFSA)
- Registered Retirement Income Fund (RRIF)
- Non registered account
There is a $25 minimum investment requirement and this also applies to any automatic contributions. Since the Tangerine global ETFs are technically mutual funds, you can actually purchase fractional shares which is convenient.
It’s also worth mentioning that if you’re currently invested in Tangerine’s Investment Funds, you can convert them to the equivalent ETF. Since the investment funds have an MER of 1.07%, it’s in your best interest to make the switch since it would save you .30%.
My Tangerine ETF review is positive. To be honest, ever since Tangerine was acquired by Scotiabank, things haven’t been the same. The interest rates they now offer are hardly competitive, but these new Tangerine Global ETF Portfolios are definitely a winner. The MER is very reasonable so they’re a great choice for Tangerine users who want to make smarter investing decisions.