Tangerine’s globally diversified index mutual funds have long been solid options for new investors looking for an easy way to start investing. But their fees have not been competitive for some time.
With Management Expense Ratios (MERs) of around 1.06%, they are more expensive than robo-advisors, TD e-series mutual funds or the one-fund index exchange-traded funds (ETFs).
But Tangerine has finally responded to the competition with its new Global ETF portfolios. Unlike their older Core Portfolio mutual funds, which invest directly in stocks, these new mutual fund products invest in ETFs. The only practical implication for investors is that this reduces Tangerine’s costs, so they can offer a similar product will lower management fees.
The new Global ETF portfolios have management and admin fees of 0.65%, which will likely result in MERs of 0.75%.
This brings them right in line with robo-advisors. For portfolios under $100,000, Wealthsimple charges 0.50% plus tax on top of the roughly 0.2% MERs of their underlying ETF portfolios. This works out to a total MER equivalent of around 0.75%. It’s about 0.65% for portfolios above $100,000.
Aside from the MERs, there are essentially no fees associated with these Tangerine products, which is a big positive for investors, particularly those with smaller portfolios:
And the enrolment and investment process couldn’t be simpler. It’s particularly hassle-free for existing Tangerine banking clients.
Investment accounts can be opened for Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Tax-Free Savings Account (TSFAs) and Locked-In Retirement Accounts (LIRAs). Unfortunately, Tangerine does not currently allow accounts to be opened for Registered Education Savings Plans (RESPs).
Tangerine offers three asset allocation options for its Global ETF portfolios:
- Balanced ETF Portfolio (60% stocks, 40% bonds);
- Balanced Growth ETF Portfolio (75% stock, 25% bonds); and
- Equity Growth ETF Portfolio (100% stocks).
This is a smaller set of options than the older Core Portfolios, which also included a 30% stock/ 70% bond option and a dividend-focused portfolio. But those two options would not be appropriate for many investors, so I think the simplicity here is an improvement.
The bond allocation of these funds uses the Solactive Broad Canadian Bond Universe Liquid ex MPL TR Index, which covers Canadian government and corporate bonds.
The equity allocation uses the Solactive GBS Global Markets Large & Mid Cap Index, which covers large and mid-cap stocks covering approximately 85% of the market capitalization in the developed markets and emerging markets.
All you need to know is that these are globally diversified funds that would be appropriate for most investors as long as they choose one of the three asset allocations that align with their circumstances.
Tangerine’s new offerings are a positive addition to the Canadian investment landscape. They are solid globally diversified index fund portfolios with competitive fees. And if you are looking to start investing, they are an easy way to start.