Say the word “investment” and most people think of risk. But it doesn’t have to be that way. There are products that will let you build a nest egg for the future without worrying that you’re putting your money at risk: segregated funds.
“Segregated funds are an investment product, like the mutual fund you would get at your bank,” says Insurance and Financial Advisor Daniel Wang of Daniel Wang Agencies. “But segregated funds give you a guarantee on your principal, which mutual funds will not.”
Imagine you invest $100 today and 10 years down the road, it loses value and it’s worth $50. If you pass away or want to take the funds out, a bank would give you the $50; with segregated funds, you’d get the entire $100 that you put in.
GICs also guarantee the principal, but inflation erodes the tiny interest that you would make on those investments. Over the long run, that doesn’t happen with a segregated fund.
“There is a type of client that will naturally gravitate toward segregated funds,” says Wang. “It’s really for individuals who are more risk averse in the investment arena.”
As with other funds investors can put products like RRSPs, RESPs and TFSAs in the segregated fund.
“Whatever the banks are offering, we do the same,” says Wang, who suggests that people start early and take a disciplined approach to their investment, such as putting $50 away each month. “The discipline of investing will reap benefits in the long run. The return is significant.”
It may be surprising to hear investment advice from an insurance agent, but it’s all part of taking care of their clients’ financial futures, says Wang.
“We have a holistic approach to what the client’s needs are, so we bring up these topics because we know most Canadians are not saving sufficiently for retirement,” says Wang. “It stems from the Co-operators’ mandate of financial security for Canadians and their communities.”
After all, financial security isn’t just limited to when there’s a natural disaster or when someone dies. You have to think about retirement, too.
“We have this conversation with every client,” says Wang. “We can help them in ways banks can’t.”