Segregated
Funds Guarantee A Return
Author:
Ivon T. Hughes
Segregated funds are for the conservative investor who is considering investing
in mutual funds. Segregated fund policies have a unique capital protection
feature that offers a guarantee of a return of up to 100% of your capital.
Segregated
fund capital is guaranteed by an insurer and achieves capital gains just
like a mutual fund. So you don't need to lock your money away in low-interest
GICs in order to guarantee your capital. An investor maintains the potential
for capital growth while at the same time guaranteeing the return of up to
100% of his/her capital. This capital protection, in most cases, applies
at maturity in 10 years or at death.
SEGREGATED
FUNDS MAY BE GOOD FOR YOU IF:
· You are a conservative investor and yet want higher returns than
GICs offer.
· You are a pre-retiree who needs growth, but can't afford to lose
money over the long term.
· You are a senior who requires estate protection and certain capital
guarantees.
Segregated
funds have a slightly higher management expense ratio (MER) that pays for
these capital-conserving features. Why would you pay for a death benefit
guarantee? Won't the added cost of the insurance element reduce segregated
fund returns? The answer is, yes it will, by a small amount. However, suppose
that an individual invests $100,000 in a segregated fund that guarantees
up to 100% of the capital at death. Assume this person dies just after a
drop in the market reduces the initial investment to $85,000. In this case,
the full $100,000 investment is paid as a death benefit. Thus the insurance
would be a major safeguard for the preservation of the estate.
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Ivon T. Hughes, The Hughes Trustco Group Ltd.
Online Insurance Broker - Get a FREE Quote TODAY!
Tel: (514) 842-9001 Email: [email protected]
Web: http://www.trustco.ca
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