Investment Options are similar to Mutual Funds A check in December 2007, found over 2,700 Seg Funds being offered. These funds take two forms – funds that are managed by the Insurance Companies and those that are sold through insurance companies but mirror an underlying Mutual Funds. For example, you can purchase Fidelity Asset Allocation through Transamerica as a segregated fund with all the above benefits or directly as a mutual fund.
The risk/return is similar to Mutual Funds The companies provide a history of performance as well as a measurement of volatility which measures risk. If the segregated fund mirrors an existing fund, then the best assessment of performance is the underlying mutual fund reduced by the difference between the MER (Management Expense Ratio).
More Information on risk/return >
Managing Risk – wraps and “fund of funds” portfolios. A study of investor profiles over the past decade shows that investors embraced risk in the late 90's, avoided risk in the early 2000's and now want to manage risk
In 2006, $21 billion or 47% of combined industry net sales were in fund-of-funds portfolios… and the trend is increasing. As at Q2, 2007, $20.2 billion or 65% of combined industry net sales are in portfolios.* Most of the portfolios use third party Mutual Funds combined to provide various returns and risks. For example, Equitable Life offers the Franklin Templeton Quotential family of funds which consistently achieve 4 and 5 star ratings.
More Information on wraps and portfolios >
*Source: Investor Economics Summer Fee Based Report August 2007
Investor Economics Household balance Sheet 2007
Taxation is similar yet differentSeg Funds are considered a trust for tax purposes which results a number of subtle but important differences which I cover in depth in the details. One example is that with Mutual Funds, you could be taxed on income you never received as taxation is based on who owns the mutual fund units on a given date at the end of the income period. E.g. if you buy units one day before the end date, you are assessed for all income earned in that period, even though you did not benefit from that income. Seg Funds calculate the income on only the period you actually own the fund.
More Information on taxation >
Leveraged Investments with Seg FundsSegregated Funds offer several advantages when it comes to borrowing to invest. While this strategy is not for everyone, there are potentially significant advantages to borrow money to invest when the interest is tax deductible, the loan is interest only, and the principal is guaranteed out ten years.
More Information on leveraged investments >
Why Should I Ask Insurance Direct Canada for help with this?
Let us help you get the best solution for your situation. You've been working through our site at the top level or digging deeper into explanations and examples and have some questions. We have a number of associates who are experts in Seg Funds who would welcome the opportunity to assist you in reviewing your needs and looking at which funds would be most appropriate for you. We are paid by the insurance companies for our services when we submit the application and all cheques are made out to the insurance company. You never make cheques out to us or our company.
We are here to help but that is easy to say. Why should you choose to phone our “on line” associate or request a call from one of our associates? Well there are seven good reasons.