For a DIY investor, Tangerine investment funds can be a great way to get yourself into the index investment market. I’ve talked a lot about TD e-Series funds in other articles, but Tangerine Investment Funds are a great option for those who are looking for investment accounts with no account costs and low management fees, easy transactions, and a simple buy and hold approach (no re-balancing!). Let’s look at the basics about Tangerine Investment Funds.
Related link: Step-by-step: How to buy Tangerine Investment Funds
Note: I am not employed by Tangerine, and only share this information to make investing easier for others. If you find information in this post useful, and decide to sign up to invest with Tangerine, consider supporting this blog by using my Orange Key (46415105S1) and using the referral links contained in this article, that all point directly to the Tangerine website.
What are Tangerine Investment Funds?
Tangerine Investment Funds are a series of index-based investment portfolios that allow you to buy a single asset that has low fees and global diversification. Instead of having to buy multiple index funds across different countries to diversify your portfolio, Tangerine includes this all in a single fund, keeping your investment easy and simple.
When looking at index fund investment against actively managed mutual funds, to quote the Tangerine website “Historically, over 80% of active mutual fund managers haven’t been able to consistently outperform the indexes over the long term.” These Tangerine investment funds provide you a single option to provide broad market exposure at a low cost – great for those just getting into the world of index investing.
What can you buy
Tangerine has a series of 4 portfolios which all contain index investment strategies, and modify the asset allocation based on your level of risk. As with other index portfolios, the percentage of bonds in your portfolio is relative to your level of risk. The more risk your willing to take, the smaller ratio of bonds in the portfolio (as bonds are a much less volatile asset compared to stocks). You can see the options below, including what is contained in the portfolio asset, and listed from lowest risk tolerance to highest risk tolerance:
I’m not quite sure why Tangerine names the portfolios this way, but they really could be renamed, Low risk tolerance, low to medium risk tolerance, medium risk tolerance, high risk tolerance. As you can see, as your level of risk tolerance (and therefore possibilities of greater gains) goes up, the percentage of bonds goes down.
What are the MER’s and how are they calculated?
MER’s (Management Expense Ratio) are the fee’s associated with owning a fund. They are an annual rate that is calculated daily, but are incorporated into the price of the fund, and are never really noticed by the investor. Remember, you won’t see a charge for this fee, it is built into the fund price!
Tangerine Investment Funds have a MER of 1.07% – much lower than many actively managed mutual funds, which can often be in the range of 2.5%, but not quite as low as buying individual index funds (see my TD e-Series fund info page to see comparable MER’s) which can be between 0.3% and 0.5%.
Some of the Tangerine Investment Funds also have a minimal Trading Expense Ratio (TER) fee that is added onto the MER and range between 0.01% and 0.02%, so very small
MER Cost example
How much does that 1.07% fee actually cost you? Let’s look at an example. If you started your investment portfolio with $13,500, here is what it would actually cost you per year:
However, these fee’s won’t be exact. They will change slightly depending on the price of the funds and how much more you add to the investment. Overall, for a portfolio of these size, you would expect to pay around $146 for the first year in management fees. Again, these fees are built into the price of the fund, so you’ll never see this money come out of your account.
Are there any additional investment fees for Tangerine Investment Funds
There are no additional trading fees or account fees for Tangerine Investment Funds. It is free to open chequing, savings and investment accounts with Tangerine, and with no trade fees, you only have to remember about the built in MER/TER of 1.07% – 1.09% you won’t pay any other fees!
Profit history
One of the most important ideas behind investing is that past performance does not always indicate future performance. Just because an asset went up 10% last year, doesn’t mean it will go up 10% this year.
But looking at the long term history of an asset can provide you some insight of the kinds of gains and losses that an asset can make.
Remember when looking at those above numbers that these are the returns coming out of a global recession in 2008/2009, and while the riskiest portfolio (Equity Growth) has shown 11% returns over the last 5 years, it would also be the portfolio to lose the most money in another economic downturn.
Are they a good fit for you?
Tangerine Investment Funds are a good fit for a lot of people, specifically:
- For those who don’t have a lot of money to invest (and are unable to avoid account fees with other brokerages)
- Those looking for a simple investment fund to purchase. Once you know your level of acceptable risk, you don’t have to worry about purchasing multiple funds, you can buy the single portfolio, and be covered in all markets.
- For those who are interested in investing, but not constantly monitoring their funds, or are worried about re-balancing their portfolios, and maintaining target portfolio percentages. Tangerine Investment Funds take care of all of that.
Tangerine Investment Funds aren’t the absolute cheapest way of investing your funds in index markets, but they do have very reasonable fees, cheaper than almost all actively managed mutual funds, while often providing better returns than actively managed mutual funds. They provide a cheap, simple solution, for those getting started in planning for their future and entering the world of investment.
Where can I buy them
Tangerine Investment Funds can only be bought through Tangerine’s online banking portal. Luckily, chequing, savings and investment accounts are free, so it’s easy to sign up and get access to buying these funds. You can sign up now for a free chequing account at the Tangerine website.