Retirement Planning
Similar to
Mutual Funds, Segregated funds are the Insurance industries version of of pooled funds under management. Although the performance can be similar, Segregated Funds have guarantees not offered by Mutual Funds. Maturity Guarantees and Death Benefit Guarantees, Creditor Protection and Probate Protection can certainly make investing more appealing to
risk averse individual although these types of funds usually charge a slightly higher MER or Management Expense Ratio.
There are a variety of types within each category:
Money Market Funds
Money market funds invest in good quality government guaranteed investments with very short time frames. These investments pay interest to investors. They are most appropriate for short term investment and savings goals or in situations where you want to safeguard the value of your investment while still being paid interest. Money market funds have relatively low risk compared to other mutual funds but they also have low returns. However, they do usually pay higher interest than a savings account or short term deposit.
Bond Funds
Bond funds invest primarily in bonds. When you buy a bond, the company selling it to you is promising to pay you your money back on a certain date with interest. Bond funds have a higher risk (especially interest rate risk) than money market funds, but result in higher returns. Unlike money market funds, bond funds are not restricted to investments with short time frames. Some bonds come due in 20 years. There are many different kinds of bond funds and as a result they vary in their risks and returns.
Equity Funds
Equity funds invest primarily in stocks of companies, generally common shares. When you buy a stock of a company you are buying a piece of the ownership of that company. Some equity funds invest strictly in Canadian companies and others may invest in companies in other countries. Equity funds are riskier than money market or bond funds, but they also can offer the highest potential returns. A stock's value can rise and fall quickly over a short period of time, but historically stocks have performed better over the long term than other types of investments, such as bonds and money market instruments. Equity funds are often best used as long term investments.
To start benefiting from the features of segregated funds and Guaranteed Minimum Withdrawal Benefits (GMWB's) please
contact us for to arrange a meeting.
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