How do Mutual Funds and Segregated Investment Funds Differ?

What is a Mutual Fund?

mutual fund is a pool of money contributed by many investors that is managed on their behalf by professional fund managers.

Mutual funds offer investors a wide choice of professional managed, diversified, liquid and affordable investments that can be conveniently purchased. Often the most difficult task is determining which mutual funds are most appropriate for you. A financial advisor can assist you in selecting the best mutual funds in terms of performance, risk, management team, and service.

What are Segregated Investment Funds? And How do They Differ From Mutual Funds?

Segregated investment funds (‘seg’ funds) are mutual funds offered by life insurance companies. The fund assets are separated or “segregated” from the insurance company’s other assets to protect the investor in case of the company’s insolvency. When you purchase a segregated fund, you are actually buying an individual variable insurance contract.

Segregated funds offer several advantages over regular mutual funds:

1. Guaranteed Principle - Most funds guarantee 100% of the principle invested at the end of ten years.

2. Reset Feature - The guaranteed principle can be reset or “bumped up” during the ten-year period.

3. No Probate Fees - Fund assets pass directly to beneficiaries, avoid costly estate and probate fees.

4. Creditor Protection - Fund assets are generally protected from creditors.

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