Segregated Funds – Guaranteed investments

Picking Favourites.

One of my favourite tools for investing is Segregated Funds. My reasoning for that is this… the biggest reason not to invest that I hear from people, is because they are scared to “lose all of their money”. And that’s a perfect reason to not want to invest. In fact, I also don’t want to lose all of my money. Now it’s especially a fair argument when you are investing all on your own in only a handful of companies because if one of those few companies that you have invested in goes broke, that could leave quite a large dent on your investments. That’s where diversification and different funds come into play for me. Unless you are sitting in front of your computer all day watching the markets, your money is better off in the hands of a professional money manager. In fact, if you miss the 10 best days for investing within a year, you can almost cut your returns in half.

Segregated Funds.


As you can see in the preview photo, there’s a ton of benefits with segregated Funds that make them stand out from the crowd. You’re probably wondering… what’s the catch? Well the “catch” use to be that they were more expensive to manage then a typical mutual fund, but competitiveness has brought that argument to be almost completely irrelevant. Some Segregated funds actually have a lower MER (management expense ratio) than the related mutual fund.

The most distinct benefit of segregated Funds are the guarantees they can provide. You can get a growth set of guarantees at 75/75. Now that means there is a 75% guarantee on both maturity and in the case of death. You can get an estate protection guarantee of 75/100. That simply means there is a 75% guarantee on maturity, and a 100% guarantee in the case of death. The final option is a 100/100 which offers a 100% guarantee on both. The maturity guarantee comes at the 15th year, and you are able to lock in any growth once a year. So if on that 15th year, everything was down 50% (extreme example), you would get your guarantee amount.

Now in my honest opinion for the everyday Canadian, segregated funds are the best tool for investment for this reason. In times the market is down, we are able to remove emotion from investing because we have our guarantee, and we can come at a more logical direction. That means when we have a market crash like we had in 2008, we don’t have to be scared of losing our investments and selling low. Instead we can come with a logical perspective, buy low and sell high. It’s easier said than done when you have no reassurance. Segregated Funds provide that reassurance.

Creditor Protection.

This is an especially cool benefit for anyone thinking about going into business in the future. Because segregated Funds are protected under the insurance act, we receive creditor protection for our investments. This means if you have been investing in segregated funds for a while, and your business went bankrupt, your creditors could try to claim your seg fund investments, but they wouldn’t receive any access to them. We actually had an example where a family went bankrupt on the advice of the bank, and they ended up losing everything other then their segregated Funds. Now at least they will have something to start over with.

Avoid Probate.

When you pass away, everything you own is deemed to be sold. Which could present a fairly large tax bill and it also happens to be quite a long process at times. By investing in segregated Funds, you are giving your beneficiaries the opportunity to avoid that process and have the funds go straight to them.

Successor Annuitant.

This next benefit is often overlooked. With Segregated funds, we get the opportunity for our TFSA’s (tax free saving accounts) to be passed on to our beneficiary and have it continue to grow tax free without effecting that beneficiaries contribution room. For those that would like to set up their children with a way to maybe retire with a large sum of money tax free, this is an amazing option.

The Verdict.

I could go on about examples of how segregated Funds could benefit you and your family, but the best way to get an idea of how you could be positively effected would be to sit down with a financial broker. As always, my door is open to anyone wanting to learn a bit more about money and finance. If I am not in your area, I can get you in contact with one of my colleagues from around North America. Don’t be afraid to reach out on our contact page.

we always provide a 0 pressure atmosphere.

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