**Disclosure, I have done work with Tangerine before, but I received no financial compensation for this post. All opinions are my own
Tangerine is known for having one of the best high interest savings accounts in Canada, but did you know they also offer Tangerine index funds? If you’re not familiar with index funds, it’s a product that takes a passive approach towards the market. What that means is that computers mostly do all of the work with these funds. There’s no fund managers buying and selling stocks. Index funds are basically a hands off approach.
Becoming an index investor over the years has become quite popular. Many people realize that accepting average returns will beat active management 80% of the time. More importantly, the fees that come with index funds are a lot lower compared to mutual funds. For reference, 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 saving over your investment lifetime.
Admittedly, Tangerine investment funds are more expensive compared to other options out there, but I still think they’re a great product. Keep reading my Tangerine investment funds review and find out why I think their four funds are great for all types of investors.
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 or prevent any losses, but in reality, no one can predict the future.
There are five 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.
Tangerine Balanced Income Portfolio
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.
Tangerine Balanced Portfolio
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.
Tangerine Balanced Growth Portfolio
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.
Tangerine Equity Growth Portfolio
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.
Tangerine Dividend Portfolio
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 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, 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.
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.
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.