What Segregated Funds Are All About?
A mutual fund is a form of collective investment that pools money from many investors and invests their money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. However mutual fund investments are susceptible to market risks.
Mutual funds share the same risks associated with the types of investments the fund makes. If the fund invests primarily in stocks, the mutual fund is usually subject to the same ups and downs and risks as the stock market. You need to scrutinize the offer document properly before investing in such funds.
Insurance companies have come up with segregated funds as a battling sword against mutual funds. Segregated funds are also known as individual variable insurance contracts (IVIC). They combine the features of both mutual funds and insurance as in akin to mutual funds IVICs are also modes of investment and akin to insurance they provide guarantee and tax benefits. Let us now see how exactly Individual variable insurance contracts are analogous to both mutual funds and indemnity policies.
Similar to mutual funds you can invest your money in a number of disparate segregated funds. You may choose anything between growth dependent funds or bond funds or a combination of both depending upon the characteristics to be fulfilled to attain your targets.
Individual variable insurance contracts or segregated funds are also analogous to insurance in the following ways:
1) Segregated funds offer maturity guarantee typically of around 75% after a period of 10 years.
2) Apart from this segregated funds also offer alluring death remuneration. The family of the dead will be given the difference between the guaranteed amount and the market value of the fund at the time of the death.
3) You do not have to worry about any harassment from your creditors because segregated funds offer protection against creditors. Your creditors will not be able to grab hold of your assets due to this protection as segregated funds also fall under the insurance category.
4) Finally, segregated funds detour the validation procedures so aid in easy transfer of money to your survivors in case of death. Since it does not need probate there are no costly expenses associated with it.
Inspite of the expensive initial dealings, segregated funds are gaining importance as they give financial security in terms of guarantees. If you are really interested in segregated funds you need to be cognizant of the various other aspects involved as well before actually indulging into it.
Mutual funds share the same risks associated with the types of investments the fund makes. If the fund invests primarily in stocks, the mutual fund is usually subject to the same ups and downs and risks as the stock market. You need to scrutinize the offer document properly before investing in such funds.
Insurance companies have come up with segregated funds as a battling sword against mutual funds. Segregated funds are also known as individual variable insurance contracts (IVIC). They combine the features of both mutual funds and insurance as in akin to mutual funds IVICs are also modes of investment and akin to insurance they provide guarantee and tax benefits. Let us now see how exactly Individual variable insurance contracts are analogous to both mutual funds and indemnity policies.
Similar to mutual funds you can invest your money in a number of disparate segregated funds. You may choose anything between growth dependent funds or bond funds or a combination of both depending upon the characteristics to be fulfilled to attain your targets.
Individual variable insurance contracts or segregated funds are also analogous to insurance in the following ways:
1) Segregated funds offer maturity guarantee typically of around 75% after a period of 10 years.
2) Apart from this segregated funds also offer alluring death remuneration. The family of the dead will be given the difference between the guaranteed amount and the market value of the fund at the time of the death.
3) You do not have to worry about any harassment from your creditors because segregated funds offer protection against creditors. Your creditors will not be able to grab hold of your assets due to this protection as segregated funds also fall under the insurance category.
4) Finally, segregated funds detour the validation procedures so aid in easy transfer of money to your survivors in case of death. Since it does not need probate there are no costly expenses associated with it.
Inspite of the expensive initial dealings, segregated funds are gaining importance as they give financial security in terms of guarantees. If you are really interested in segregated funds you need to be cognizant of the various other aspects involved as well before actually indulging into it.
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