Segregated funds offer many benefits as the Walton Financial Group outlines here
Segregated mutual funds, also known as segregated funds or seg funds, are a type of investment vehicle offered by insurance companies. They have some unique features compared to traditional mutual funds, and they come with several benefits:
1. Principal Protection: One of the primary benefits of segregated mutual funds is principal protection. Insurance companies guarantee a portion of the investor’s initial investment, typically ranging from 75% to 100%, depending on the specific policy and terms. This means that even if the market value of the investments in the fund declines, the investor is guaranteed to receive at least the guaranteed portion of their initial investment back when the policy matures or upon their death.
2. Estate Planning: Segregated funds are often used as a tool for estate planning. The guaranteed death benefit ensures that beneficiaries will receive a predetermined amount upon the policyholder’s death, regardless of market fluctuations. This can simplify the estate settlement process and provide a reliable source of funds to heirs.
3. Potential for Growth: Like traditional mutual funds, segregated funds can still offer the potential for capital appreciation and investment growth. Investors can choose from a variety of fund options, including equity, fixed income, and balanced funds, to align with their investment objectives and risk tolerance.
4. Probate Avoidance: Segregated funds are typically structured as insurance contracts, not part of the probate process. This means that the assets held within segregated funds can bypass the probate process, saving time and potentially reducing probate fees and taxes.
5. Reset Options: Some segregated funds offer reset options, allowing investors to lock in gains periodically. This means that if the fund’s value increases, the investor can reset the guaranteed amount higher, providing an opportunity to benefit from market growth while maintaining principal protection.
6. Investment Flexibility: Segregated funds offer a range of investment options, allowing investors to choose funds that align with their investment goals, risk tolerance, and time horizon. This flexibility makes it possible to build a diversified portfolio within the insurance product.
Make an appointment with a financial adviser at The Walton Financial Group in Barrie Ontario to discuss where Segregated Funds might fit in your investment portfolio
