I have a strong affinity for Tangerine, and for good reason. Their minimal fees, user-friendly website, and competitive interest rates have earned my trust. So, when I discovered that Tangerine also offers investment opportunities, I was intrigued. Their investing platform seemed promising at first glance, boasting a strategy centered on index investing, global diversification, and automatic savings plans. However, a closer examination reveals a significant drawback: the fees are notably high compared to most Exchange Traded Funds (ETFs), without commensurate additional value.

Let’s delve into the issue with Tangerine Investment Funds. Take, for instance, one of their popular products, the balanced growth portfolio INI230. According to Tangerine’s website, this fund is allocated as follows: 25% Canadian bonds, 25% Canadian stocks, 25% American stocks, and 25% International stocks. The management expense ratio (MER) for this fund stands at 1.07%, meaning for every $100 invested, you’ll pay a management fee of $1.07 annually. While not exorbitant, comparable ETFs tracking the same indexes offer significantly lower fees.

Consider these ETF alternatives: XBB for Canadian bonds (MER: 0.09%), XIU for Canadian stocks (MER: 0.18%), XUS for American stocks (MER: 0.11%), and XIN for International stocks (MER: 0.49%). When weighted accordingly, the effective MER averages at 0.22%, a remarkable 0.85% reduction compared to Tangerine Investment Funds.

To illustrate the impact of this fee reduction, imagine investing $1,000 today with an annual return of 7%. With a 1.07% MER, your investment would amount to $5,630 in 30 years. Conversely, with a 0.22% MER, it would accumulate to $7,156, marking a 27% increase in returns due to reduced fees.

If you opt for ETFs, you’ll need to open an online brokerage account, with Questrade recommended for beginners and Interactive Brokers for seasoned investors. Replicating Tangerine’s investment funds is straightforward: allocate 25% of your capital to each corresponding ETF.

However, switching to ETFs requires periodic portfolio rebalancing and dividend reinvestment, typically on an annual and quarterly basis, respectively. Additionally, if your capital is limited, it may not be worthwhile to switch until you’ve accumulated more savings, say over $5,000.

In conclusion, for novice investors, Tangerine’s Investment Funds offer a reasonable option compared to many mutual funds. However, for those with established portfolios or substantial sums to invest, exploring alternatives is advisable.