Segregated Funds in Canada

When you wish to grow your wealth and at the same time provide insurance protection to safeguard your savings the best option is to invest in Segregated funds. It is safe because these policies function as a pool of money invested across various assets such as stocks, bonds and mutual funds and are managed by professional investment managers. With segregated funds, you can benefit from the expertise of investment professionals, while diversifying your investments and mitigating risks.

The added insurance protection offer is that sets segregated funds distinct from other investment options. These policies guarantee that a portion of your investment will be protected, regardless of market performance. This means that even if your investments decline in value, you can be rest assured that a minimum percentage of your initial investment will be returned to you. With a range of series choices available, you can choose the best segregated fund policy to suit your investment goals and risk tolerance, while benefiting from the peace of mind that comes with knowing your savings are protected.

Equity Segregated Funds

These funds invest primarily in stocks and shares of publicly traded companies. These funds aim to generate long-term capital appreciation by investing in a diversified portfolio of equities. They offer the potential for higher returns but also carry a higher level of risk compared to other types of segregated funds.

Fixed Income Segregated Funds

Fixed income segregated funds focus on investing in fixed-income securities such as government bonds, corporate bonds and other debt instruments. These funds aim to provide a steady stream of income and relatively lower risk compared to equity funds. They are suitable for investors seeking stable income and capital preservation.

Balanced Segregated Funds

Balanced segregated funds, as the name suggests, offer a balanced mix of equity and fixed income investments. These funds aim to strike a balance between potential growth and income generation while managing risk. They are suitable for investors looking for a moderate level of risk with the potential for both capital appreciation and income.

Asset Allocation Segregated Funds

Asset allocation segregated funds dynamically adjust their investment mix based on market conditions. These funds aim to optimize returns by allocating assets among different asset classes such as equities, fixed income securities and cash. The asset allocation is managed by the fund's portfolio manager or investment team to adapt to changing market conditions and investment opportunities.

Target Date Segregated Funds

Target date segregated funds are designed to align with a specific target retirement date. These funds gradually shift their investment mix over time, becoming more conservative as the target date approaches. They automatically adjust the asset allocation to reduce risk and preserve capital as the investor's retirement date draws near.

Specialty Segregated Funds

Specialty segregated funds focus on specific sectors, themes, or investment strategies. Examples include funds focused on socially responsible investing, global infrastructure, technology, or emerging markets. These funds provide investors with the opportunity to invest in specialized areas based on their interests and preferences.

It's important to note that segregated funds offer certain benefits, such as potential creditor protection and the ability to designate a beneficiary outside of the estate. However, they may also come with higher fees compared to traditional mutual funds. Consulting our financial advisor who can help you understand the various types of segregated funds available, their features, risks and suitability based on your investment objectives and risk tolerance.

Tax Efficiency

Segregated funds offer tax advantages, including the ability to defer taxes on capital gains until the policy is redeemed or until the policyholder passes away. By utilizing this approach, individuals can potentially achieve substantial reductions in their tax obligations over the long term.

Flexibility and Customization

Segregated funds offer a range of flexible options, including the ability to choose between different investment objectives, maturity guarantees and death benefit guarantees. This allows investors to tailor their policy to their specific needs and goals.

Benefits

Benefits of Segregated Funds

Segregated funds come with numerous advantages for investors, including guarantees for both maturity and death benefits, protection against creditors and the ability to avoid the probate process when passing on assets. These features make segregated funds an attractive investment option for those seeking to protect their investments and provide for their beneficiaries. A few benefits are listed below:

Capital Preservation

Segregated funds provide a safety net for securing your original investment by offering maturity and death benefit guarantees. You can choose between 75% or 100% guarantee of your original investment. If the market drops, then you receive all or most of your investment back on maturity date. Moreover, your named beneficiary will receive either the market value of your investments or the guaranteed amount, whichever is higher at the time of your death. Thus, it is an excellent choice for any individual who is worried about how to pass over his assets to his beneficiaries.

"Lock In" your new market gains

Growing your principal investment with a new total that you have gained is an added advantage with segregated funds. Here you have the option to lock in your gains by resetting your principal investment when you reach a maturity or death guarantee, for an additional fee. This feature allows you to capture any market gains and increase your guaranteed amount, providing you or your beneficiaries with the new total instead of the original amount.

Avoiding Probate

One of the most significant advantages of segregated funds for estate planning is the ability to bypass probate. Unlike other types of investments, the money in your segregated fund policy passes directly to your beneficiaries without flowing through your estate. This means that your beneficiaries can receive the money quickly, and the funds are not reduced by taxes and fees associated with settling an estate.

Timely Distribution to Beneficiaries

Segregated funds policies are typically paid out to beneficiaries within a few weeks of the paperwork being filed, making them an efficient way to transfer wealth to your loved ones. In contrast, other types of investments, such as registered mutual funds, may take longer to distribute to beneficiaries who are not your spouse. By choosing segregated funds for your estate planning needs, you can ensure that your beneficiaries receive their inheritance in a timely and efficient manner.

Asset Protection

Segregated funds offer a higher level of asset protection that may not be available with other types of investment like mutual funds. By naming a specific type of beneficiary, such as a spouse or a child, your assets within a segregated fund policy may be protected from creditors. When you experience a financial crisis or bankruptcy your assets are protected from seizure by creditors. This provides you an additional layer of financial security.

Liability Protection

With a segregated fund policy, your assets may be protected in the event of a lawsuit or legal judgement against you. This means that your investments may be less exposed to liabilities that could decrease your assets. For business owners or other individuals at risk of legal action, picking segregated funds is an attractive option to protect their assets and secure their financial future.