During the RRSP campaign, I met one of my clients who held investments with Manulife for a while. During our meeting, he showed me his investment statements from the other company. He had invested in segregated funds for the past 10 years and wasn’t happy with the results. While I am not bashing Manulife (I still took it in my portfolio for our best 2010 stock picks contest), I can’t say that I am a big fan of Segregated funds either!
What is the difference between a Segregated fund and a Mutual fund?
Segregated funds (also called seg funds) are one of the strange beasts created by some crazy financial scientist in the labs of insurance companies. They are very similar to mutual funds when we look at their investment composites. If you look in your track investment apps you will see that there are seg funds for every kind of investor profile. However, when you call a life insurance investment services, they will explain the difference between segregated funds and mutual funds. Read More…
Taking a quick cursory glance in todays paper one can clearly see the high costing funds are these seg funds. Any knowledgable investor would have no value in them when you can just mix your holdinds with safer instruments and be done with it.
I can’t believe they still offer these things.
Seg funds are just like mutual funds but with an insurance policy wrapped around it. Because its only draw is to protect your intial investment (usually up to 75% upon maturity or your death) it is a good idea if you think your investments are in trouble for the long term (many people would have done well prior to the 2008/2009 period). But because of the significantly higher %mer any gains you would have had through market change or protection offered by the policy is lost to some fat cat in a big office.
Segregated funds are saturated with fees and more fees. I think they are junk and should be avoided. Unless you enjoy throwing money away.