Category Archives: Money Tips

ING Direct is Now Tangerine.ca: an Update on Tangerine in 2014

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What is Tangerine.ca?

As I mentioned Tangerine is the new name for what used to be called ING Direct. They recently changed their website address to tangerine.ca. They also “refreshed” their website’s look. Personally, I don’t think they improved it much but it’s not significantly different in a good or bad way, which is good, right?

It Matters That ING Direct has Changed Its Name to Tangerine If You Have a Mortgage or Unmortgage

Because your home insurance policy and your municipal (property) tax department may have the name of the company owning your mortgage on their files, you need to tell them that your bank’s (mortgage’s) name has changed from ING Direct to Tangerine.
The name “unmortgage” has been changed to “Tangerine Mortgage.”

What Happened to my THRiVE Chequing Account?

Nothing has changed with anyone’s existing ING Direct THRiVE chequing account, except the name. They are now called Tangerine chequing accounts. (Which is easier to spell, admittedly.) You can still use your existing paper cheques and transfers will go through the same as they did before this change to the name used for advertising the accounts.

Cheques ordered in May 2014 and later will have the Tangerine name.

The savings account name has also been changed from the ING Direct investment Savings Account to a Tangerine Savings Account.

What Happened to the Streetwise Funds?

Similarly, the name has changed for the ING Direct mutual funds now they belong to Tangerine.

The word “Streetwise” in the title has been changed to “Tangerine.” For example, the Streetwise Balanced Fund is now called the Tangerine Balanced Fund, as of May 2014.

ING Streetwise Portfolios have been renamed Tangerine Investment Funds.

Where Can I Get Cash or Make a Deposit to my Tangerine Account?

Although they have updated their website and changed their URL, Tangerine/ING Direct are still working on changing which Automated Bank Machines you can use for free.

Tangerine (formerly ING Direct) customers have access to ABMs to make deposits and withdrawals to and from their Tangerine chequing accounts.

Tangerine customers who only have a savings account generally make their deposits to a bank account linked to Tangerine, then transfer the money into the account electronically. (In the past, I personally have mailed cheques in to ING Direct to be deposited in my savings account. I’m not clear if that is still an option because now I have a Tangerine chequing account, and I can deposit my cheques by taking a photo of them with my tablet and using the Cheque-In deposit app.)

Right now until September 29, 2014, customers can still use ABMs that belong to the Exchange Network for free. These machines are usually in credit unions or National Bank branches. You can find the location of these ABMS using the Tangerine website. https://secure.tangerine.ca/web/InitialTangerine.html?locale=en_CA&device=web&command=goToAbmLocator

You can, of course, also just use cash back when making a debit purchase at a store. Debit transactions are no-fee with Tangerine.

As of September 30, 2014, however, the ABMs customers can use will be switching. At that time, customers will have to use machines belonging to the Scotiabank ABM Network. For cash withdrawals, these include the ones at Scotiabank branches but also include some at Shell stations, 7-Eleven’s, Quickie convenience stores, Cineplex Theatres and Couche-Tard’s. For deposits including cheques customers will probably have to go to a Scotiabank branch ABM. In fact, customers should be able to start using these Scotiabank ABMs starting in June.

This switch in ABMs is annoying many customers in B.C. where the Exchange network is larger than the Scotiabank network. Tangerine is therefore still trying to find a way to improve what they offer.

Using International Bank Machines, ABMs. with Tangerine

Scotiabank belongs to the Global ATM Alliance. This means that Tangerine will not charge you a surcharge or access fee when you withdraw cash from nearly 50,000 machines in over 40 countries. There are sometimes fees charged by the international ABM’s bank, though, so check the details with Tangerine before you travel.

Withdrawing US Dollars from Tangerine

If you can get to a Tangerine ABM (there aren’t very many) you can withdraw US dollars from your US dollar Tangerine account.

Are Tangerine’s Fees Changing?

So far, Tangerine has not announced or admitted to any plans to increase any fees. To stay competitive with other e-banks such as President’s Choice Financial, they may decide to continue to offer many no-fee services.

NOTE: As of January 2015 Tangerine now charges a fee if you transfer your RRSP, RRIF or TFSA money to another financial institution. (You can still withdraw cash from your TFSA for free but remember not to contribute it/deposit it again until the next January 1 to avoid over-contributing and having to pay the CRA a fine.)

As of May 4, 2014, Tangerine.ca offers

  • unlimited free debit transactions
  • unlimited free cash withdrawals
  • unlimited free deposits
  • unlimited free transfers between an external linked bank account and your Tangerine account
  • unlimited free bill payments
  • no charges for using a cheque with your Tangerine chequing account but you have to buy the paper cheques

Is Tangerine Offering Any Bonuses or Promotions Right Now?

Today, May 4, 2014, Tangerine.ca is offering the following promotions and bonuses:

If you make a deposit into your existing

  • Savings account
  • RRSP investment savings account
  • TFSA investment savings account
  • RRIF investment savings account

which increases your total balance above what it was on April 7, then the amount that is above that April 7 total will earn interest at a rate of 2.5% per year, calculated on the balance at the end of each day, and paid monthly. The higher interest rate will only be paid until July 31, 2014.

UPDATE: In January 2015, Tangerine.ca is offering a similar deal for deposits made. The higher rate will only last until March 31 2015. Check their website for the details.

To try to make this clearer, if you have a TFSA, a Tangerine chequing account and 3 savings accounts at Tangerine, they will add up how much money in total was in all 5 accounts on April 7. They will then add the totals every day from April 8 to July 31. Every day where the daily total exceeds the daily total on April 7, they will pay bonus interest on the amount above the starting April 7 amount.

They had to make it that complicated because people love to game the system. They love to transfer money from one account to another to try to get bonus interest. Many people will even transfer money from one bank to another to try to get bonus interest.

For most of us, this bonus interest offer is not that important.

For example, if you could increase your total account balance at Tangerine by $1000 over the total on April 7, the most bonus interest you could earn, if you deposited the $1000 on April 8 and left it there till August 1, would be about
$1000 x (2.5/365)(23+31+30+31)= $7.88
(That’s just approximate. It’s not exactly how they calculate the interest but it’s close.)

So if you just sold your boat or got a major tax refund, it may be worth depositing the amount in your account. Of if you have $40 000 saved up for your next car at a different bank, and you were going to open a Tangerine account anyway now might be a good time to do that. But it’s not a huge incentive.

New Savings, TFSA, RRSP, and RRIF Account Bonus

There’s more money to be made if you decide to open a new Savings account at Tangerine before June 30 2014.

This only works if you have *never* had a savings account at ING Direct/Tangerine. They keep track even if you’ve closed an account there years ago. They include TFSA, RRSP and RRIF accounts as “savings” accounts. So if you had a TFSA account, and even if you’ve closed it years ago, you still can’t get a bonus for opening a new savings account today at Tangerine.

If you open your first Savings account with Tangerine.ca and if you put in at least $250, they will pay you a bonus of $50 within 30 days after you opened the account.

You can only get one bonus regardless of how many types of savings accounts you open.
E.g. you can get a bonus for opening one of

  • a Savings account
  • a TFSA account
  • a RRSP account
  • a RRIF savings account

but you can not get 4 bonuses for opening one of each.

New Tangerine Chequing Account Bonus

If you open your first chequing account ever, and if you put it at least $250, they will pay you a bonus of $50.

They keep track of whether you had a chequing account and closed it so you can’t get a bonus if you used to have a chequing account even if you closed it.

If you have a savings account only, though, you still can get a bonus for opening a chequing account. (That’s a bit unusual for Tangerine.ca promotions.)

NOTE that chequing accounts do not qualify for the 2.5% bonus interest rate promotion.

Direct Payroll Deposit Bonus

If you complete the paperwork to have your pay cheque deposited directly to your Tangerine Chequing Account by July 31, 2014, they will pay you a $50 cash bonus. You should read the details on this because they are a bit complicated.

Various people have tried to get this bonus for direct deposit on non-payroll money, such as an automated payment in from another bank account. It doesn’t work. They are only interested in paying the bonus for a real pay cheque being deposited regularly from an employer.

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Do you like to try to play bonus interest games? Do you shift a large chunk of money back and forth between banks such as Tangerine and PC Financial to catch these different offers? Does it amuse you? Please share your experiences with a comment.

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Why Couch Potato Investing Doesn’t Work

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Why Couch Potato Investing Doesn’t Work …
… For Everyone

Sorry but I couldn’t resist a trick title like that: It’s Friday; It’s overcast; It’s been raining and cold all week so few warblers are bothering to move: I’ve got to have something to smile about. However, today I will argue that for some people Couch Potato investing, also known as index investing, does not work.

What Do I Mean by Couch Potato or Index Investing?

There are several different investing methods that get lumped together under the heading index investing or Couch Potato investing. There is an absolutely fantastic website about this type of investing run by the Canadian Couch Potato at http://canadiancouchpotato.com/ for those of you who would like more information.

What I’m discussing here is a “basic” Couch Potato method of investing:
You invest in 4 types of ultra-low-cost ETFs:

  • A Canadian equity fund that matches an extremely broad and diversified Canadian index
  • A US equity fund that matches an extremely broad and diversified US index
  • A Foreign (non-US, non-Canadian) equity fund that tries to capture a broad swath of the businesses listed on the various international stock exchanges
  • A bond fund (often one with a short term-to-maturity and a mixture of government and corporate high quality bonds)

The percentage invested in each of the 4 ETFs could vary but a common split would be 20% Canadian; 20% American; 20% Foreign; 40% Bonds.

You split your money and invest it at the correct percentage in the 4 different ETFs.

Monthly, quarterly or semi-annually you add new contributions proportionately.

Once a year, you re-balance the portfolio to keep your asset allocations at 20/20/20/40. This could be done by buying more of the class that has dropped with your new contribution or by selling some of your excess units and buying more of your missing units. (E.g. if your allocation has become 30/10/20/40, you would sell some of the 30% ETF and buy more of the 10% ETF.)

You keep doing this for 10-50 years.

You do NOT sell your ETFs randomly just because the stock market is going up or down, only annually if you need to re-balance.

You do NOT invest extra in one of the 4 ETFs just because “it’s on a roll” and you want to make some extra money quickly.

Why Does Couch Potato Investing Work?

This type of index investing works because it takes all of the guess work, timing and emotion out of investing.

It’s based on the theory that over time the value of money invested in the stock markets and bonds will increase so if you invest in them and stay invested at all times, the value of your investments will increase.

Some will argue that you will even earn the most by investing in this way. That gets way too complicated for me to be interested in, but it is generally agreed by everyone that it is a very good way to invest which should result in an increased value of your savings over time.

I keep saying “over time” because at any one MOMENT in time, the value of your investments may NOT be higher. And that’s the problem.

Couch Potato Index Investing Does Not Work for Everyone

The reason couch potato index investing does not work for everyone is that not everyone can stick to it.

Some people cannot accept seeing large decreases in the value of their investments.

Other people cannot accept seeing investments not increase in value over several months or even years.

For example, following a simple Couch Potato portfolio, an investor might put 20% of their money into an International equity ETF. Let’s say they invested $10,000.

During a nasty period of market upheaval, they may see the value reported for their investment in that ETF drop to $7000.

To be a proper Couch Potato investor they must

  • Shrug and ignore it, until
  • during their yearly asset allocation re-balancing time
  • when they must either sell some of their other ETFs to bring the percentage back up to 20% of their portfolio, or
    invest new money in this ETF until it comes back up to 20% of their portfolio.

That’s right: They have to sell their “winner” and buy more of their “loser”; or put more new money into their “loser.”

Because it’s not really a “loser.” It’s just an ETF that has dropped in value. Over time, lots of time, the Couch Potato philosophy says that it will go back up in value and in fact increase in value over the starting value. So by re-balancing, the investor is actually buying more of a “bargain” ETF not a “loser” ETF. And doesn’t everyone like to buy a bargain?

Some people, though, just cannot handle this. At best they will ignore this drop in value of the international ETF and refuse to rebalance their asset allocation annually. At worst they will sell out of their entire position in this international ETF “dog” and put the money into something else.

Either way, they are no longer investing in the Couch Potato Index style.

They are not likely to succeed as a Couch Potato investor because they are ignoring the simple, basic rules that make this style work.

How Can I Decide If I Can Succeed as a Couch Potato Index Investor?

It’s really not possible to be sure how you will react to a dizzying drop in the value of an ETF until it happens. However, you can ask yourself some tough questions to get a glimpse of how you might feel.

The internet is full of great charts.

https://ca.finance.yahoo.com/echarts?s=^GSPTSE
is a link to a Yahoo chart of the value of the S&P TSX Composite Canadian index. If you click on the Max link under the chart, you will see how it has behaved for many years.

https://ca.finance.yahoo.com/echarts?s=SPY#symbol=SPY;range=my
is a link to a Yahoo chart of the value of the SPDR S&P 500 NYSE. If you click on the Max link under the chart, you will see how it has behaved for many years.

It’s not just important to look at those sharp drops.

It’s also important to look at the width between two points at the same height. The width is how many months or years it took for the index to return to the SAME value. Not to increase, just to return to where it was.

Photo of TSX simplified chart

Looking at the Yahoo TSX chart, if you bought units in a matching index fund only in August 2000, you’d have had to patiently wait until about December 2005 just to *break even*. (Dividends will help a bit but not as much as you might think if you buy a “most of the TSX” ETF. Many TSX stocks pay almost nothing in dividends.)

Similarly, if you bought in only at June 2008, you’d have to wait till February 2011 to break even and even then it would go down again only rebounding by September 2013.

If you bought in only during April 2011, you would only have broken even in October 2013.

Image of SPDR 500 simplified chart

The SPDR S&P 500 chart also shows the need for patience. Someone who bought only in September 2007 had to wait till early 2013 just to break even.

NOTE: These charts are not meant to represent the actual ETFs you might buy in your portfolio. They are just meant as quick examples of real market fluctuations.

Are You Brave, Patient and Stalwart Enough to be a Couch Potato?

Intestinal fortitude. That’s what you need to be a good Couch Potato index investor.
You have to be prepared to stomach more than a 30% market drop for one, or more, of your ETFs.

If you truly want to be a Couch Potato, you have to be prepared to lounge back through a 50% market drop and keep waiting, often for years, for your holdings to gradually climb back up to where you bought them at.

That means you have to wait to *break even*, not just to make a profit.

If you sell during a drop, you will almost always lose. And you are not a Couch Potato Index investor any more.

Some people who try to be Couch Potatoes panic when the markets drop. They sell low. They won’t wait years for a rebound. They then curse the markets and stalk off to invest only in GICs and savings accounts.

Regular contributions do make drops easier to weather because you buy some new units when prices are low to help offset the ones you bought when prices were high. It makes it feel like you’re making money more quickly as you wait for the re-bound.

Proper annual rebalancing is also critical and as a bonus it can obscure the cause of your paper losses. (Remember they are not TRUE losses unless and until you sell your ETFs.)

Who Does Couch Potato Index Investing Work For?

It could work for anyone, if they let it.

It certainly will work for someone who is totally dispassionate about finances and fully capable of ignoring even catastrophic market crashes because he/she understands and believes the mathematics behind this investment method.

It works for thousands of people.

It might work for you.

Am I a Couch Potato Index Investor?

No.

I won’t let it work for me: I am extremely risk averse. I know I would not be willing to watch 20% of my invested money (in any one index) drop to half its previous value.

We do use Couch Potato Index Investing within one of our defined contribution pension plans. Frankly we have no other logical choice. It’s doing reasonably well but it sure does hurt to wait out the times the markets are down and the agonizingly long time it takes for the markets to rebound. Fortunately, our bonds fund did extremely well during the last market drop which buffered the loss somewhat.

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Are you a Couch Potato Index investor? Or do you actively trade? Or are you a Fixed Income Only investor? Or do you take a hybrid approach? You’re probably doing reasonably well using any method if you have no debts and are steadily saving money. Please share your opinions and advice with a comment.