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  • Writer's pictureVolpe Financial Solutions


When markets waver, it’s easy to lose sight of your investment goals – or why you invested in the first place. But, looking back at your reasons for investing, it’s likely that you already made some calculated choices around what is best for you and your future. It’s important not to lose sight of that fact, so you know what to do when markets go down.

Guaranteed Income Funds or “Segregated funds” are a safe investment choice, if you want to protect your contributions in case markets take an unexpected downturn. These funds come with unique benefits that were made to help weather times of volatility and uncertainty.

How segregated funds can put your mind at ease:

1. Your money is protected:

Segregated funds come with guarantees that other investments don’t offer. Depending on your chosen guarantee level, 75-100 per cent of the money you invest is guaranteed.* Your guarantee level is never more important than when markets are struggling. Use this pandemic as an example.

2. Your family and your estate are better protected:

Naming a beneficiary can help to protect the value of your estate. And, just like with life insurance, proceeds from your segregated fund policy will be paid directly to your beneficiaries – in a timely fashion, and in a way that relieves them of potential complications around accessing the funds. Ex. Monies getting held up in probate or executor action like Mutual Funds and Stocks.

3. Your investment is managed by professionals:

Fund managers have been through market uncertainty before. They understand markets, are equipped with sound strategies, and take an approach that is designed to outlast market volatility. In short, your segregated fund investment is built and managed to withstand volatility over the long term, just like Mutual Funds.

3 Advantages of Segregated Funds:

1. Principal guaranteed – Depending on the contract, 75% to 100% of your principal investment is guaranteed if you hold your fund for a certain length of time (usually 10 years). If the fund value rises, some segregated funds also let you “reset” the guaranteed amount to this higher value – but this will also reset the length of time that you must hold the fund (usually 10 years from date of reset).

2. Guaranteed death benefit – Depending on the contract, your beneficiaries will receive 75% to 100% of your contributions tax-free when you die. This amount is not subject to probate fees if your beneficiaries are named in the contract.

3. Potential creditor protection – This is a key feature for business owners in particular.

3 Disadvantages of Segregated Funds:

1. Your money needs to stay in a segregated fund contract – You have to keep your money in the segregated fund until the maturity date (usually 10 years) to get the guarantee. If you cash out before that, you’ll get the current market value of your investment, which may be more or less than what you originally invested. However, you can still change investments as needed.

2. Higher fees – Segregated funds usually have higher management expense ratios (MERs) than mutual funds. This is to cover the cost of the insurance features. However, a good advisor can find low fee segregated funds.

3. Penalties for early withdrawals – You may have to pay a penalty if you cash out your investment before the maturity date. This is the same as with any investment - but again, a good advisor does not charge back-end fees.


Segregated funds have attractive benefits; including probate minimization, principle and death benefits guarantees, and creditor protection. However, when used as a planning tool, it’s important to consider all investment options and use an advisor who can properly analyze your current situation to see what option is best suited to you.

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