Today’s modern cars have airbags. While we are not expecting to get into an accident it is nice to know they are there, just in case.
Wouldn’t it be nice to have investments that can provide us with airbags protecting us from market downturns? There are a few ways to protect your investments:
GICs: A Guaranteed Investment Certificate (GIC) is a secure investment that guarantees 100 per cent of the original amount that you invested.
Your investment earns interest, at either a fixed or a variable rate, or based on a pre-determined formula. Depending on the type of GIC you purchase and which institution you purchase your GIC from you may also receive deposit insurance up to certain limits. The deposit insurance is there to protect you in the event that the institution fails.
Banks and Trust companies GICs are covered by Canada Deposit Insurance Corporation (CDIC). Insurance company GICs are covered by Assuris. Credit Union GICs are covered by The Credit Union Deposit Insurance Corporation (CUDIC), a statutory corporation, guarantees all deposits and non-equity shares of British Columbia credit unions as set out in the financial institutions act.
Segregated Funds: A Segregated Fund (Seg Fund) is a type of investment fund administered by Canadian life insurance companies in the form of individual, variable life insurance contracts offering certain guarantees to the policyholder such as reimbursement of capital upon death. As required by law, these funds are fully segregated from the company’s general investment funds, hence the name segregated funds.
Unlike GICs, Seg funds offer many different kinds of investment options within their structure and income may also be guaranteed over and above capital if required. Seg funds are also protected by Assuris up to certain limits. Seg funds can also now offer guaranteed income for life as an additional feature.
It is important to note that using segregated funds or GICs offered by life insurance companies in non-registered accounts will allow you to designate a beneficiary thereby reducing the costs to your estate which your heirs will ultimately bear. Please remember to always consult your investment advisor before taking any action.
Written by Stuart Kirk, CIM. Stuart Kirk is an Investment Funds Advisor with Manulife Securities Investment Services Inc and a Retirement Planning Specialist with Hicks Financial Inc.
The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc or Hicks Financial Inc (www.ghicks.com). Stuart can be reached at stuart@ghicks.com.
