Yes, it’s that time of year when we see performance updates. We are are also bombarded with mostly useless ‘picks’ and projections for the future. That’s also known as guesswork. All we know is the past. And ironically, almost all investment decisions are based on the past and present. Yes, we can learn from the past. We’ll take a look at the performance of the Tangerine Portfolios.
“Study the past if you would define the future.”
Confucious
When we invest we mostly hope that some or enough of the past will repeat.
And perhaps Mark Twain said it best …
“History doesn’t repeat itself but it often rhymes,”
I also think that Mark Twain meant to write, perhaps …
Past performance does not guarantee future returns.
We are all guilty of making guesses, placing bets if you will. Those bets are based on the past. And we are all more influenced by the recent past. We are greatly influenced by our own experiences. They all get together to help us form our own biases.
I have penned a few times that the Tangerine Portfolios can teach us a lot – about that recent past. The Tangerine Portfolios are wonderful. They are simple. And they are cheap enough. If you’re a Tangerine client you should give them a look. You are likely currently invested in high fee mutual funds. Those funds are likely drastically under-performing those Tangerine Portfolios.
As we discovered in my recent post on 2019 ETF fund flows, it’s mostly over for the high-fee mutual fund industry. Here’s how Canadians invested their monies over the last 2 years.
The end is nigh.
For 2018 plus 2019 net sales.
- ETFs – $43.2 billion
- Mutual Funds – $13.9 billion
Ironically, Tangerine would show up in the mutual fund tally. These are index-based mutual funds. Yes, not all mutual funds are terribly bad, just most of them.
OK, let’s get to the 2019 returns and the past performance history.
Here’s the breakdown of the stock to bond ratios. Keep in mind that the portfolios are an even mix of Canadian, US and International (developed market) stocks. The Balanced Portfolios use Canadian bonds as the risk managers. The performance of the Tangerine Portfolios is simply affected by the risk levels.
Total returns for 2019.
- 30% stocks / 70% bonds – 9.97%
- 60% stocks / 40% bonds – 14.06%
- 75% stocks / 25% bonds – 16.10%
- 100% stocks – 19.42%
Obviously, Tangerine investors found nothing to complain about in 2019.
The outlier is the Tangerine Dividend Portfolio. That portfolio is 50% Canadian stocks, and then 25% each of US and International. The strong performance of the Canadian dividend stocks drove those returns.
- Dividend Portfolio – 20.03%
Of course those Canadian and US high dividend yield indices are available in ETF form. That was recently covered and updated in this post.
We now have 3-year numbers for the Dividend Portfolio. We see that it lags the Balanced Growth model. As always an investment approach can take many years or decades to do ‘its thing’. The key is to understand your investment(s) and why you chose that path.
Tangerine Investors staying the course.
As we discovered in the annual report on Canadian ETFs, investors were de-risking in 2019. Tangerine Investors not so much. When I look at previous tables for assets it appears that more monies are flowing to the more aggressive funds. Monies are flowing to Balanced and through to the all-equity models. Perhaps there’s more consistent and better behaviour being demonstrated by Tangerine investors?
Paid to take on risk.
Of course 2018 was a year that delivered a year end market correction. Portfolios were largely negative. In 2019 investors were rewarded for taking on additional risk. We see significant separation in returns between the risk levels. But if you look at the 3-year, 5-year, 10-year and inception numbers we see that gap shrinking.
In 2021 we will have 10-year numbers for the Equity Growth Portfolio. I’m guessing that the return of Equity Growth will be quite similar to that of the Balanced Growth Portfolio.
The Tangerine Portfolios vs Couch Potato
Dan Bortolotti recently updated returns for the model portfolios for 2019.
It’s nice to see that Dan still introduces his readers to the Tangerine options. His post begins with a look at Tangerine and then moves on to the Couch Potato models, and one ticket. From that post …
If we compare Tangerine to Model ETF Portfolios.
- Conservative model. Tangerine 9.97% vs 10.75% for ETFs.
- Balanced model. Tangerine 14.46% vs 15.02% for ETFs.
- Assertive model. Tangerine 16.10% vs 17.16% for ETFs.
The difference is due to the higher fees (1.07% for Tangerine) and slight difference in asset allocation and assets of the indices employed. Keep in mind that there are no transaction costs for when you buy or sell at Tangerine. ETF investors may incur costs for buying and selling plus other discount brokerage fees.
All said we can see that the Tangerine investor does give up some returns on paper. That is consistent over longer periods compared to the self-directed ETF couch potato investor. Tangerine investors may make that up by way of behaviour and consistency. That will trump any performance number comparisons. Want to make more money? Stay the course. Put in more money as our friend Mark Seed of myownadvisor will often remind us. Your personal savings rate is sooooooo important. Find more monies to invest.
Dan also looked at the TD e-series.
And a few of the one ticket balanced options …
I’ll be back soon with a full report on the asset allocation portfolios available in Canada at Vanguard, BMO and iShares and Horizons. Let’s compare the performance of the Tangerine Portfolios vs One Ticket.
For the Balanced 60/40 model. Tangerine vs One Ticket.
- Tangerine 14.46% / Vanguard 14.81% / iShares 15.19%
Can you do better than Tangerine?
Sure the self-directed investor can likely do a little better. But that would take incredible patience, great behaviour and the ability to re-balance on schedule. The beauty of the Tangerine Portfolios is that they are managed for you. They are re-balanced on schedule. Investors also complete a risk profile.
Certainly many can benefit from more robust advice and comprehensive financial planning. You might seek out an advice-only planner.
Cut The Crap Investing readers can sign up through this Tangerine partnership link.
And if you go that ETF route.
Canada’s top-ranked discount brokerage.
Cut The Crap Investing readers can sign up with Questrade (Canada’s top-ranked discount brokerage) through this partnership link. You can buy ETFs for free!
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Thanks for reading my look at the performance of the Tangerine Portfolios. See you in the comment section. Kindly share this post.
Dale
