Segregated funds diversify your investment

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Segregated funds have their shares protected to a certain degree by insurance.

The insurance protection advantage The notable advantage is that some segregated funds offer to insure up to 75% or higher, of the principal invested in a segregated fund if held for a number of years, typically 10. Depending on the situation, there may be some creditor protection if an investor went bankrupt if he owns segregated funds.

Diversification advantage Segregated funds offer the investor the benefit of maximum diversification, with minimal exposure to any one stock. You pool your investment with the combined capital of other investors, which allows everyone to invest in many companies, not just focus on two or three larger stocks.

Segregated Fund managers usually diversify among at least 20 companies, investing no more than 10% of the fund’s total dollars into any one security.

Other advantages of Segregated Funds

• You can buy additional shares of a segregated fund at any time.

• An automatic purchase plan called dollar-cost averaging (DCA) lets you invest equal amounts at regularly scheduled intervals. You buy more fund shares when the prices are lower, fewer when prices are higher, thus averaging out the price of the shares purchased.

• Segregated fund contracts can be registered in RRSPs or RRIFs.

• Dividends, where applicable, are easily reinvested.

• Some fund companies allow transfers between their funds without charge.

• You can borrow against segregated fund assets (unless the contract is registered).

Legal Terms of Use Agreement




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The Internet copyright content URLs can be set up on an individual website or corporate website insofar as no page served from the servers of Canadian Financial Publishing Group (Adviceon) is rearranged or copied. All URLs must be accessed from websites or servers owned or leased by Canadian Financial Publishing Group. No other server is allowed to serve the content offered by Canadian Financial Publishing Group.

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All E-Newsletters, E-Magazines, E-Pages, Internet Pages, or any url offering up information created by Canadian Financial Publishing Group must be paid for in advance and only be sent from launching systems that Adviceon or Canadian Financial Publishing Group has approved. If any other system is used to deploy copyright information of Canadian Financial Publishing Group it must be pre-approved by email prior to use. Canadian Financial Publishing Group url pages are not to be sent in tandem with any other document, other than a simple introduction by a paying Adviceon client.

Website Readiness

Canadian Financial Publishing Group will not be responsible for premature advertisements or promotion by any user or client to anyone, by any method presenting their website as ready to view, until all configurations are proven to be working to the client’s total satisfaction as it often takes more time than anticipated to configure a website for multiple reasons. Adviceon may access monthly payments as soon as the architecture of the website or pages of the website are formed.

Financial Content Data URLs

Where Adviceon’s content is linked to a website by a paying client, such urls should be checked to see if more urls have been added, or if some have been changed or discontinued, and such management is the responsibility of the user.

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All online statements and statistics set forth on any online page as offered by Canadian Financial Publishing Group are intended for educational purposes only and are believed to be true and dependable, however accuracy of content is not guaranteed, nor will Adviceon or a Financial Advisor or a company associated with the Financial Advisor or any party contracting the services of Adviceon assume liability for Financial applications or a securities trade or investment decision or life insurance purchase based on any article, graph or statistic on this website, even where an error or omission occurs. The reader is advised to seek additional professional advice and to evaluate strategies applicable to each individual’s objectives.

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We endeavour to keep legislative related information at this site current. However legislative related information is subject to change at any time without notice to users and the posted information at any Internet website serviced by Canadian Financial Publishing Group may not immediately reflect such changes. Information in this website is subject to change without notice and Adviceon and the owner of this website is not liable for any inaccuracies in the information presented.

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The content in this website does not constitute an offer or solicitation. References in this Internet website to third party goods or services should not be regarded as an endorsement of these goods or services. This website is intended for Canadian residents only and the information contained herein is subject to change without notice. The owner and publisher of this Internet-based website are not liable for any inaccuracies in the information provided.

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Anyone attempting to cause damage to the files or stability of any website operated by Canadian Financial Publishing group or divisions or Trade-names such as Adviceon, or Financium, or Skyroom will be sued at the highest level of business law possible for all damages caused by either neglect or intention to harm.

General Mutual Fund Disclaimer

Only registered representatives of a Mutual Fund Dealer offer mutual funds; and segregated funds are also offered by life insurance representatives.

Before investing in any mutual fund, it is important to read the specific fund’s simplified prospectus. Commissions, trailing commissions, management fees, tax payable, and expenses may be associated with mutual fund investments. Mutual funds are not guaranteed. Their values change frequently and past performance may not be repeated. Any indicated mathematical return, including those set forth on graphs or tables in this online publication, is used only to illustrate the potential effects of the compound growth rate and is not intended to reflect future values of returns on any specific investment or any other financial product. It is strongly recommended that you seek professional advice to inform yourself regarding mutual funds or any other financial product as it relates to your circumstance.

Borrowing for investment purposes can magnify the risk as well as the reward of investing. All precautions regarding mutual funds also apply to segregated funds. You should not make any personal decision or act on any information in this online publication because it is meant for educational purposes only, and it may not be currently accurate or applicable to your circumstance. The publisher (and Canadian Financial Publishing Group) will not be held liable in any way for any financial planning application, or inaccuracies, or errors, or omissions in relation to the information in this online publication. Trademarks and registered trademarks are owned by the publisher (and Canadian Financial Publishing Group). Reproduction by any means without written permission of the Adviceon is strictly forbidden.

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Canadian Financial Publishing Group supplies website content to existing websites as well as builds new Financial websites that yield Adviceon content. To order a website or discuss how to use website content please contact Canadian Financial Publishing Group at or call:

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Canadian Financial Publishing Group
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The Guardian Clause: Protect your children

A will can protect your children’s financial future

Very few Canadians have a will, and fewer have a currently updated will. Without a will, you cannot outline directives regarding your most “priceless asset” – your children. A will allows you to clarify your selection of a legal guardian for your children. Here are some steps to take to prepare for the transfer of parental responsibility when planning your will with your lawyer.


Choose an individual. Perhaps your parents, a brother, a sister or a friend could assume the appropriate parental role in your absence. Consider their living quarters, age, health, ethics, financial means and current family stress load. More importantly, talk to them and get their approval first. Do not simply assume that your parents or siblings will take care of the children.

• Select a contingent guardian in case the first choice refuses the guardianship, takes ill or passes away.

• Ensure that the guardian will have sufficient capital to provide for the children, which may include the need for life insurance. Know your current financial net worth and how much income it can generate for your children.

The guardian clause is only an interim appointment. In your Will you can insert a provision that you are appointing someone as your child’s guardian – which most lawyers do. It is important to remember that any such appointment is only good for 90 days, because it is an interim appointment only. It therefore allows all interested people to appear before the court, and the court will make the final decision about who will be the guardian. Why include the guardianship clause if it is only an interim appointment? You should include it, because the guardianship clause provides strong evidence of the parents’ choice of guardian, although it is not determinative.

Include the following parameters in your will:

• Choose a trustee to invest and manage any money that your children may inherit.

• Express your financial directives regarding the maintenance and education of your children and the age when they may personally receive the balance of the inheritance.

• Update your directives when your circumstances change, reflecting for example, changes in your net worth; a new child in the family; a deceased beneficiary or desired guardian; or special wishes regarding the transfer of certain assets to specific children.

•  Choose a competent, informed, and trustworthy executor with the patience to follow time-consuming legal detail.


What is the difference between volatility and risk?

Volatility and risk are different concepts, but both have a role in determining your investment success.

Volatility is simply how much the market will increase or decrease, whereas risk is the amount of loss or gain you are willing to accept. How volatile your investments behave is often derived by the level of risk you are willing to accept. During periods of market volatility, it is important to stay focused on your asset allocation goals according to your predetermined risk profile.

Volatility is simply short-term instability that can affect all stocks, including good stocks or good equity funds, because of fear generated in the markets. The Euro-debt fears in 2012 are a good example of this. When markets are down, even a company that provides a useful, durable product may be affected. When the market calms, however, the company’s stock price may rise again.

What is an Estate Bond?

Life insurance can ensure estate-planning tactics

Prominent in the ’90s, the term “estate bond” is an old concept of the life insurance industry that mathematically proves how life insurance can protect and transfer certain assets that may otherwise be left vulnerable to market-related erosion or taxation.

Although investment assets and life insurance are indeed different parts of your strategic financial goal-setting. They can work in unison to create wealth. How they work together goes far beyond the adage “buy term and invest the difference,” which simply uses term insurance at the level of basic financial protection, unlike the alternative, advanced features of the estate bond, built right into a tax-planning manoeuvre.

How does an estate bond help to defer taxes?

This concept is an estate’s all-encompassing wealth preservation strategy because it is designed to work upon the death of the insured. Although an estate bond is not an investment designed for short-term financial planning, it can increase the tax-free wealth that you pass on to heirs.

The estate bond is ideal for the investor who has already maximized his or her tax benefits using an RRSP or has significant investments in vehicles to defer capital gains tax. This investor may enjoy a thriving business enterprise, hold a large fund or stock portfolio, and want to maximize some of the capital that will be left to heirs.

Consider a situation in which a couple of age 65 would like to leave funds to their grandchildren to help them purchase their first homes as well as enhance their future.

How does it work? For example, with an initial investment of $150,000, you can acquire a joint last-to-die life annuity. This life annuity will pay $7,000 per year after tax (after the marginal tax rate is paid). This $7,000 payment is then used to purchase a permanent joint last-to-die life insurance contract  – on either one spouse’s life or both spouses’ lives – with a face value of $350,000. At this stage of the financial planning, the $150,000 of estate value grows to $350,000, which will one day pass to the estate tax-free! Note: The figures vary based on circumstances and interest rates.

Note: Note: Joint last-to-die Life Annuity based on a male, age 65; female, age 65, single premium non-registered deposit of $150,000, joint survivor annuity. Life insurance is based on a male age 65, non-smoker, female 65, non-smoker, joint last to die for $350,000 death benefit (with a level cost of insurance, and increasing death benefit). Ask your financial advisor to compare the projected growth of permanent life insurance (some use tax-sheltered GICs and tax-advantaged segregated funds to enhance the face-value growth) versus taxable investments (such as equity investment funds and/or GICs). In most cases, the estate bond, along with certain guaranteed benefits, will far outperform the initial capital invested with respect to the after-tax value passed on to the estate.

The estate bond is definitely an estate-planning tool to maximize wealth payable to heirs after death. It is true that there is far less liquidity in the life insurance contract. Therefore, consider this advanced planning concept if you have already amassed enough money to guarantee a good retirement lifestyle. Because life insurance proceeds are paid to your beneficiaries tax-free, you can be assured that the government can’t take any tax bite out of this wealth bequeathed to your loved ones.

Life Insurance is the foundation of your net worth

Life insurance has been called the foundation of net worth planning. If you have a spouse or children, the initial stages of your financial plan should include adequate life insurance coverage.

There are two types of life insurance You can either buy pure term insurance coverage, or a plan that can last a lifetime with various investment vehicles that can gain value and enjoy tax advantages while the policy remains in force. You can also mix pure term insurance with an investment in one policy, with certain types of whole life.

The cost of lifetime insurance coverage is higher. Yet the tax-free death benefit can solve estate-planning problems such as paying an estate’s tax liability on capital gains.

However, if you can’t afford the premium for lifetime coverage, consider term insurance or a combination of both. Term plans are quite affordable.


Ask your advisor to do a capital needs analysis You may want to replace the income of the life insured—either yourself or your spouse. It is easy to calculate the capital needed over any short or long period of time in any situation if the life insured were to die. There are many professional calculators that allow advisors to prepare accurate life insurance assessments.

Review your life insurance during these life stages As we journey through life, our circumstances change dramatically. So do our needs for life insurance. It may be time to review your life insurance and verify beneficiaries, policy amounts, any riders associated with the plans.  As you evolve financially, so do your life insurance needs.

When you have a young family When you are newly married and starting a family, life insurance is purchased to provide tax-free capital in case one of the parents should die. A young mother would not be forced to go to work, reduce her lifestyle, or leave her children to cared for by others.

When your children are going to college When children go to college, many of us tap into our savings to help meet their tuition and housing expenses. We may purchase a child’s first car, or pay him/her an income for one or more years. If you die without providing continuing support, your young adult child may need to quit seeking a higher education due to a shortage of funds.

When your estate will face a large tax bill As you approach retirement, you may have accumulated assets that will be taxed on capital gains: such as a cottage, a business, large equity mutual fund holdings, or a stock portfolio. Life insurance can help pay the income tax due in your estate. This can include paying for taxes on remaining RRSPs or RRIFs, as these funds are fully taxable to the estate (where there is no surviving spouse or dependent child). It can also pay off large business debts that may be left as an ongoing liability, weighing on a surviving spouse’s financial security.