What's The Difference Between a Segregated Fund and a Mutual Fund?
Do you like the feeling of knowing that your money is well invested and well protected? Segregated funds combine the growth potential of a mutual fund with the security of a principal guarantee.
Guarantees:
Principal guarantee: Segregated funds operate under a fixed contract term, with a principal guarantee that protects your investments at maturity or death.
Maturity guarantee: When a deposit matures and is redeemed (a minimum of 10 years from the date of deposit), you will receive a top-up payment, less any withdrawals and fees, if the market value is less than the guaranteed amount.
Death benefit guarantee: When a segregated fund annuitant dies and the market value of the investment has declined, the named beneficiary will receive the guaranteed amount, less any withdrawals and fees.
Here's a quick summary of the added features that can make segregated funds an excellent alternative to mutual funds.
Segregated funds vs. mutual funds
| Features |
Segregated funds¹ |
Mutual funds |
| Professional portfolio management |
 |
 |
| Diversification among asset classes and management styles |
 |
 |
| Grow a portfolio while diversifying risk |
 |
 |
| Liquidity: easy access to your money through daily price valuations |
 |
 |
| Ability to bypass probate and keep financial affairs private |
 |
Occasionally² |
| Potential creditor protection for registered accounts |
 |
 |
| Potential creditor protection for non-registered accounts |
 |
|
| A guarantee of the principal (or a specified percentage) at maturity³ |
 |
|
| A guarantee of the principal (or a specified percentage) at death³ |
 |
|
| Lock in market gains using resets |
 |
|
¹ Segregated fund fees are higher than mutual funds, as they include a management fee and an insurance fee component.
² Non-registered accounts with joint ownership and right survivorship only (all provinces except Quebec). Registered accounts can bypass probate when a beneficiary is named.
³ Withdrawals reduce guarantees proportionately. Guarantees end at age 100.
|