Segregated Funds vs Mutual Funds: What are the differences?
Get to know the fundamental differences and learn which product is right for you.
Segregated funds and mutual funds share some key benefits, such as:
But, there are also some fundamental differences:
Which solution is right for you? Take a closer look at the differences.
Benefits and guarantees: Your principal investment has a maturity or death benefit guarantee of 75% or 100%, depending on the level of protection you choose.
Protection from market volatility: Seg funds are susceptible to market fluctuation, but your maturity and death benefit guarantees give you extra protection.
Automatic resets: Depending on your age at purchase and your guarantee level, seg funds have a death benefit reset to protect your investment growth in the event of a premature death.
Estate planning: Both RRSPs and non-registered segregated funds with a named beneficiary are not subject to probate.**
Creditor protection: Seg funds are life insurance contracts. In the event of a lawsuit or bankruptcy, with an appointed family member as the beneficiary, your funds may be protected from creditors. This is especially important for business owners.
Benefits and guarantees: There are typically no maturity or death benefit guarantees on mutual funds.
Protection from market volatility: Most mutual funds are affected by changes in the stock market. If the markets perform poorly, you could end up with a lot less than you started with.
Automatic resets: Mutual Funds don’t have a maturity or death benefit guarantee, so this isn’t an option.
Estate planning: Only RRSPs with a named beneficiary are not subject to probate.**
Creditor protection: Mutual funds have no protection from creditors except in limited circumstances.
**Note: After someone dies, their estate is subject to probate, which is the legal validation of their will. Probate or estate administration fees can be as much as 1.5% of the estate in some provinces. During probate, assets are frozen to bypass probate not only saves up to 1.5% of assets, it also relieves the burden on family of having to possibly go through a lengthy and complicated process to access funds.
The Co-operators® used by Co-operators Life Insurance Company under license from The Co-operators Group Limited.
ANY AMOUNT THAT IS ALLOCATED TO A SEGREGATED FUND IS INVESTED AT THE RISK OF THE POLICYHOLDER AND MAY INCREASE OR DECREASE IN VALUE.