Mutual Funds

What is a Mutual Fund?

Mutual Funds use a pool of money collected from numerous investors to purchases stocks, bonds or other assets.  This portfolio is managed by a professional investment manager who has a distinct objective and style of investing, such as aggressive growth, conservative value or a focus on a specific market sector.
When you invest in a mutual fund you are purchasing a proportionate share of the fund's holdings and the income it generates, but not any of the actual assets. The value of the assets determines the value of the fund – the Net Value Asset (NAV) – calculated daily after market close.

Advantages

• A Mutual Fund provides diversification and asset allocation because buying power allows the purchase of shares in a large variety of stocks and bonds.
• Because there is a commission charged for each security you purchase, a mutual fund is able to achieve economies of scale. If you were to purchase 15 to 20 stocks required for diversification, a good portion of your investment funds would go towards paying the commissions.
• Purchases of Mutual Funds can be through fractional shares, allowing for investors to purchase in smaller denominations. Investors can then take advantage of dollar cost averaging via monthly purchases.
• A professional investment manager has several advantages over individuals when selecting securities for a Mutual Fund:
  • Access to economic data and research results;
  • Technology which enables in-depth analysis;
  • Experience and education which enables them to interpret and make informed decisions;

Segregated Funds

What is a Segregated Fund?

A segregated fund is a contract with an insurance company that provides insurance and a tax protected investment. The term “segregated” refers to the fact your investment is separated from the general assets of the insurance company.

Advantages

Segregated funds are similar to mutual funds in that they are run by professional managers and can provide diversification. In addition they provide:

• Maturity and death guarantees;
• Potential creditor protection (of primary concern for business owners or professionals whose assets may be exposed to creditors);
• Estate planning (proceeds of your contract are paid directly to your beneficiary, avoiding the time and expense of probate);
• Consumer protection (protects Canadian policyholders, within limits, from loss of benefits in the event of the insolvency of the company);

Annuities

What is an Annuity?

One method of providing a guaranteed income during retirement is to use a lump sum of money to purchase an annuity from an insurance company. Annuities will provide an income that is determined by the type of contract you purchase, the interest rate, the number of years you will be collecting income and the options selected.

Annuities can be purchased to provide income for a set number of years or for life. After your death they either pay any remaining payments to your estate or your spouse. You can choose a plan with a death benefit or indexed with inflation.

You will pay income tax on income you receive from an annuity whether purchased with tax sheltered dollars coming from pensions, RRSPs or RRIFs or with after tax dollars. The taxes you pay on the latter will be determined by whether you are drawing from interest earned or from the principle.

Advantages

An annuity can simplify your retirement planning whether it is used as your sole income or to supplement income from other sources. An annuity can be incorporated into a strategy to reduce overall taxes if planned in advance.

Visit our Investing and Savings page, or Retirement Planning page for more information.