Every so often, I take a quick gander at the new investment products that come onto the market. For one thing, it’s important to never stop learning about investing. There’s no pressure to change my investment path just because I’m reading & learning about something new. The worst thing that can happen is that I’ll know more than I did before I started reading.
Over the Christmas holidays, I engaged in a consideration of new investment portfolios from Tangerine. Overall, I wasn’t horribly impressed. Let me tell you why.
But first – read the following two paragraphs very carefully and commit them to memory.
Disclaimer
I am not in any way qualified, certified, designated or otherwise authorized to give advice to anyone about how they should invest their money.
If you need or want professional investment advice, then you should hire a certified financial planner who is paid by you and not by investment companies. Do not base your investment choices on blogs that you read on the internet without careful consideration of all the factors impacting your personal situation.
Blue Lobster’s Personal Review***
*** Not to be confused with a professional recommendation that has been tailored for your life’s goal, income, ambitions, and risk tolerance.
a) Management Expense Ratios
In my view, the Core Portfolios are all too expensive. The MERs range from 1.05%-1.06%. For a similar product, you could buy an exchange traded fund at Vanguard Canada or iShares and pay considerably less in MERs. Personally, I don’t see any reason to pay MERs any higher than 0.35%-0.55% for investment products that are similar if not identical to the Core Portfolios.
Here’s a link to Vanguard Canada’s index funds/ETFs. You’ll see that their MERs are way cheaper than Tangerine’s.
https://www.vanguardcanada.ca/individual/indv/en/product.html#/productType=etf&managementStyle=index
The MERs for Tangerine’s Global ETF Portfolios are all 0.65%. I still think that this is too much to pay for these products. As per the prospectus and despite their names, these products are mutual funds . The last time I look at this statistic, the average MER charged for Canadian mutual funds is 1%-2%.
b) Composition of the Portfolios
The Core Portfolios invest directly in various companies and in exchange traded funds. As I understand the prospectus, the Core Portfolios are mutual funds. I don’t invest in mutual funds anymore because I prefer to buy the ETF equivalent, which always has a lower MER. Why pay more for the same thing?
The Global ETF Portfolios are mutual funds created out of ETFs. Each portfolio is comprised of a subset of ETFs, held in varying proportions.
Given their newness, none of these funds holds over $7Million in assets. Again, I’m no expert but this tells me that they are much smaller in size than comparable mutual funds and ETFs.
c) Age of the Portfolios
The Core Portfolios haven’t been around that long. The oldest was started in 2008, and the newest was started in 2016.
To be transparent, I transferred my holdings to Vanguard Canada when the parent company – Vanguard – came to Canada a few years ago. I invest in VDY, which is a dividend-focused ETF with an inception date of 2012. In other words, they haven’t been in Canada all that long. Vanguard has been big in the USA for a much longer period of time and I’ve been a fan of John C. Bogle for a long time. If I hadn’t been aware of Vanguard’s history in the USA, I likely would not have invested in them since they hadn’t been in Canada long enough to give me comfort.
The Global ETF portfolios were all started in November of 2020… less than 2 months ago. As such, they do not have any kind of track record that is worthy of note.
d) Overall Impression
In my opinion, investors in these funds are paying more money to own a mutual fund where the ETFs held inside the mutual fund cost less, on an individual basis, than the cost of the mutual fund itself.
It would be far cheaper to buy an equity ETF and a bond ETF from Vanguard Canada, achieve the same performance results, and pay a lower overall MER. By purchasing equity and bond ETFs directly via an online brokerage, investors are coming out ahead because the brokerage fee, if any, for purchasing those units would be lower than the 0.65% MER that would have to be paid on the Global ETF Portfolios.
My brokerage charges me $9.95 on my monthly purchases. $9.95 x 12 = $119.40 in annual fees. Once your portfolio is more than $18,369.23 (=$119.40 / 0.65%), then you’re paying less in fees if you buy units directly instead of buying units in Tangerine’s Global ETF Portfolios.
In the interests of transparency, I have the following products with Vanguard Canada and iShares.
- VDY – dividend ETF with an MER of 0.22% (VC)
- VXC – equity ETF with an MER of 0.26% (VC)
- VSB – bond ETF with an MER of 0.10% (VC)
- XDV – dividend ETF with an MER of 0.55% (iShares)
Buying my ETFs through my brokerage account (BMO Investorline) saves me money on my MERs, and those savings are more than enough to cover my annual $119.40 purchasing costs.
e) Conclusion
I’d love to see you open a brokerage account and buy units in ETFs that best-match your investment goals. And that goal, in case you’re wondering, is to not outlive your money. Never forget that ETFs are cheaper than mutual funds.
Brokerage accounts are easy to open. You buy units in the cheaper ETFs of your choice, then you forget about them and let them do their thing over a long period of time.
However, if you’re uninterested in opening a brokerage account, then I suppose that Tangerine’s Core Portfolio options aren’t a horrible choice. If you can set up an automatic transfer from your account to one of the Core Portfolios, then I think this is probably a not-bad way for you to invest in your future dollars. My comments apply to the money going into your registered accounts – RRSP & TFSA – and your non-registered accounts. Your emergency funds will stay in cash, since you shouldn’t be forced to sell investments just to pay for an emergency.
A consideration of a new investment won’t harm you. There’s no requirement that you chase every investment rabbit that enters your field of vision. That said, it’s always a good idea to know and understand the options for your money. Get professional investment advice as needed, but always be learning about new stuff.