Two Simple (& Protected) Alternatives to Basic Mutual Funds

May 31, 2016 10:34 am Published by

One of the most important functions here at MGF is ensuring every individual client is informed about the various types of investment products available to them. Every case, every client, is unique. We strive to find the best investment product for every investor, because we all have different timelines for the future, right?

Right. Here are two ideas we discuss with people who want to invest in the longterm while being protected in the short term.

Segregated Funds With Maturity Death Benefit Guarantees

A segregated fund maturity and death benefit guarantee is something we work on with every one of our clients. Nobody wants to incur short term loss on their investment portfolio. The maturity and death benefit guarantee offers between 75% to 100% return of your principal investment. The guarantee acts as a market floor for your investment. This helps stem the tide of emotion or anxiety that comes naturally when you commit to a longterm savings product. When markets dip, the maturity and death benefit guarantee allows you to avoid selling low, because your floor is set. Neat, right?

There’s an added cost on top of your investment, but it’s a cost that’s well worth it to protect your assets and, ultimately, your future. 

Who Should Be Using Segregated Funds?

Everyone, first of all, but segregated funds are also especially useful to protect people who face a high level of financial risk. 

  • Professionals
  • Directors
  • Senior Level Managers
  • Business Owners
  • Entrepreneurs

People at risk of potential claims to their personal assets can invest in segregated funds within their RRSP or non-registered portfolios and enjoy full creditor protection. 

As long as segregated fund investments are held by an individual with family class beneficiaries, such as a spouse, parent, child or grandparent, creditor protection is available. It also helps when the investment was made in good faith, of which the majority of investments are – sometimes seg fund investments are made to shelter against a known creditor claim already in progress. 

Global Absolute Return Strategies (GARS)

Most mutual funds only reward investors if markets experience a boost. When the economy is hot, everybody wins, right? Well, if we’ve learned anything in the past 24 months, it’s that the economy ebbs and flows however it seems to desire. 

The goal of GARS is to create s positive return regardless of the market. GARS portfolio managers will invest in just about anything:

  • Currencies
  • Stocks
  • Bonds
  • Advanced derivatives

Here’s an example that hits close to home. When the Canadian Dollar was equal to the US Dollar, a GARS fund manager, knowing that strength wouldn’t last, could have actually invested in strategies to make money when the dollar weakened. The Canadian Dollar slipped, and while the Canadian stock market wasn’t pleased, the GARS investor certainly would be!

A GARS fund is a great addition to any portfolio because it adds instant diversification – it doesn’t move in line with the movements of the stock or bond market. GARS investments also carry the same benefits as segregated funds, namely maturity and death benefit guarantees at 75% and creditor protection. 

No matter how you slice ‘em, investment markets can be volatile. It’s important to be protected, but there’s a balance to be struck so we can employ strategies that return healthy growth on our investments. It only takes a little action and planning to invest for longterm growth while simultaneously protecting our assets and our loved ones from the pitfalls of short term loss. 

Need a hand with your portfolio? Give us a call!

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This post was written by Marco Faccone