A Segregated Fund (more commonly known as Seg Fund) is a type of investment fund solely administered by Canadian insurance companies.
Segregated funds are similar to mutual funds in many aspects. However, one notable dissimilarity is that, unlike mutual funds, these can provide a guarantee that part of the money you invest can be recovered and refunded to you should the underlying fund lose money. On top of that, the fact that segregated funds are issued as insurance contracts allows them to provide a wider spectrum of benefits as follows:
- Many Guarantees – as implied above, you can receive 75% to 100% of your investments when the contract ends or you pass away
- Creditor Protection – if you have a qualified beneficiary, your segregated funds can be protected against unexpected seizure by creditors. No other investments held in RRSPs and RRIFs are protected from creditors in Canada, so this is a really important benefit you can take advantage of.
The sole disadvantage associated with having segregated funds is that you will have to usually wait for a period of 10 years to pass before taking advantage of your rightful benefits. Your funds are not permanently locked, though, as you can withdraw before the maturity date arrives, but you’ll get the current market value of your investment which can prove to be disadvantageous in some cases.
In all other situations, segregated funds are a great way of investing in mutual funds, and we can help you get started. First of all, we recommend you get in touch with us today in order to receive a free, no-obligation quote for further information about how you can invest in Segregated Funds. We look forward to hearing from you!