Tangerine one fund portfolio for busy uni student?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
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Tangerine one fund portfolio for busy uni student?

Post by 2 yen »

Looking at having a young friend, who is very busy studying in uni, to start investing by using one of Tangerine's one-fund portfolios. Specifically the Tangerine Equity Growth fund with a MER of 1.07% This friend has no time to look after his own choice of funds or to rebalance, but does have $100 and maybe can find $25 a month to add to the pot with automatic transfers. His timeline is 30+ years. Tangerine has no additional fees than the 1.07% and new units are purchased for 'free'. My thought is to start with this for a few years and then if the inclination to educate himself after he graduates occurs, then he can reduce his fees later by choosing his own low cost funds.

Thoughts?

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Re: Tangerine one fund portfolio for busy uni student?

Post by OhGreatGuru »

In spite of the DIY bias of forums such as this, one of the Tangerine index portfolios are certainly a simple solution for someone who doesn't have the time (or knowledge) to manage a portfolio at this stage in life. Whether or not the 100% equity allocation in the Equity Growth Fund is suitable (instead of one of its balanced funds) is a separate question that cannot be answered on the limited information provided. eg. How certain is it that the friend will not need any of this money for 35 years? Does the friend have other, less volatile savings? What is the friend's risk tolerance?
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Re: Tangerine one fund portfolio for busy uni student?

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OhGreatGuru wrote: 11 Oct 2017 16:04 In spite of the DIY bias of forums such as this, one of the Tangerine index portfolios are certainly a simple solution for someone who doesn't have the time (or knowledge) to manage a portfolio at this stage in life. Whether or not the 100% equity allocation in the Equity Growth Fund is suitable (instead of one of its balanced funds) is a separate question that cannot be answered on the limited information provided. eg. How certain is it that the friend will not need any of this money for 35 years? Does the friend have other, less volatile savings? What is the friend's risk tolerance?
The friend will have a separate savings account for a house downpayment and we have yet to discuss risk tolerance. A more conservative fund could be used if necessary, although at this point it appears we are looking at the fund for retirement - obviously to be switched to a more conservative bent way down the road, or to DIY when appropriate.

Thanks.

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Re: Tangerine one fund portfolio for busy uni student?

Post by AltaRed »

My take is a university student really has no idea how life will unfold for him. I see early investing as a 'forced' savings vehicle and an investment learning exercise until, and as, he takes one of many forks in the world. Retirement is so far off, it is on another planet.

I'd suggest just plunking the money down in a Tangerine fund (doesn't matter if equity or balanced, aggressive balanced), make regular contributions, and then at some opportune future date, re-direct the money elsewhere. It might go into a DIY investment portfolio, maybe to pay for a wedding, or a host of other things life will throw his way especially in one's early years.
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Re: Tangerine one fund portfolio for busy uni student?

Post by Taggart »

If this is for a TFSA, until you find out how risk averse the student is when it comes to investing, they may be better off in a balanced fund rather than an all equity one.

As this PWL document says on page 5,

Most investors - especially those without much experience - can't handle the volatility of an all equity portfolio, so we don't generally recommend the Equity Growth Portfolio as a one-fund solution.

As Dan Bortolotti says in this Moneysense article:

One of the great benefits of balanced funds is that they’re rebalanced automatically: The Tangerine funds do it quarterly. A report by Vanguard found that investors who held balanced funds were less likely to make changes to their portfolios during the financial crisis of 2008 and the five years that followed, which means they weathered that event far better than most. The authors pointed out that these one-fund options “may actually help to insulate investors from one of the most insidious risks their investment portfolios face: their own behaviour.”
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Re: Tangerine one fund portfolio for busy uni student?

Post by AltaRed »

Good advice. I am seriously thinking about my own TFSA being 100% MAW104 (balanced) left alone for decades.
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Re: Tangerine one fund portfolio for busy uni student?

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Taggart wrote: 11 Oct 2017 18:32 If this is for a TFSA, until you find out how risk averse the student is when it comes to investing, they may be better off in a balanced fund rather than an all equity one.

As this PWL document says on page 5,

Most investors - especially those without much experience - can't handle the volatility of an all equity portfolio, so we don't generally recommend the Equity Growth Portfolio as a one-fund solution.

As Dan Bortolotti says in this Moneysense article:

One of the great benefits of balanced funds is that they’re rebalanced automatically: The Tangerine funds do it quarterly. A report by Vanguard found that investors who held balanced funds were less likely to make changes to their portfolios during the financial crisis of 2008 and the five years that followed, which means they weathered that event far better than most. The authors pointed out that these one-fund options “may actually help to insulate investors from one of the most insidious risks their investment portfolios face: their own behaviour.”
Read these articles before starting the thread, but the points cannot be emphasized enough.

Thanks!

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Re: Tangerine one fund portfolio for busy uni student?

Post by 2 yen »

AltaRed wrote: 11 Oct 2017 17:39 My take is a university student really has no idea how life will unfold for him. I see early investing as a 'forced' savings vehicle and an investment learning exercise until, and as, he takes one of many forks in the world. Retirement is so far off, it is on another planet.

I'd suggest just plunking the money down in a Tangerine fund (doesn't matter if equity or balanced, aggressive balanced), make regular contributions, and then at some opportune future date, re-direct the money elsewhere. It might go into a DIY investment portfolio, maybe to pay for a wedding, or a host of other things life will throw his way especially in one's early years.
Agreed. This particular student is 26 and now doing a professional degree following a first degree. He worked for 3 years before getting into professional school and is seriously thinking of marriage and a home so that probably explains his desire to start investing, even in some small way, now. I also agree that a DIY setup later, when the dust has settled and he can seriously read up on investing, would be a good option for the funds.

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