As more baby boomers retire in the coming years estate protection and preservation has become a significant consideration in portfolio management. The use of segregated funds is often overlooked as part of the solution. For individuals who are looking for lower risk alternatives these funds do offer portfolio balance and stability.


Unlike mutual funds segregated funds provide capital guarantees and death benefit guarantees-depending on the company and the product these funds provide a minimum of seventy five percent and up to one hundred percent of the initial invested capital-certainly an advantage in volatile equity markets. As well, reset features, which allow the investor to lock in gains, is available on a periodic basis and could be a valuable portfolio saver. It is noteworthy to point out that utilization of the reset feature will extend the contract maturity date.


Segregated Funds will also permit an investor to name a preferred beneficiary and the policy will be protected from the creditors of the dead investors estate. Named beneficiaries receive the proceeds of the investment policy directly, bypassing the delays, legal costs and taxes  of the probate process.. Another important feature lies in the fact that the investment provides creditor protection-for those in business or one of the professions the protection from lawsuits or bankruptcy could provide significant peace of mind.


Critics of segregated fund use often cite the marginally higher management expense ratios as a reason not to utilize these funds. One though must consider his\her needs when it comes to deciding whether or not to utilize the product. An older investor who may be nearing retirement or who is retired may feel the elimination of risk and taking advantage of the aforementioned benefits is worth the extra price while a younger  investor with a long time horizon may not be concerned of the benefits. Essentially, any guarantee comes with a cost but the excellent track record of stable returns from Canadian insurance companies may be a good investment and estate planning tool for one’s portfolio.


Diversification is an important feature of any portfolio. Talk to your investment advisor to determine if segregated funds would be beneficial for you.