Have you ever checked your investments after a market drop and felt a knot in your stomach? For many Canadians, market swings bring more than headlines – they spark real anxiety about the future of their savings. That is why it pays to know about investment options that can protect your portfolio without sacrificing growth. That is where segregated funds come in: a unique investment option that offers both growth potential and key safeguards.

What Are Segregated Funds?

Segregated funds, sold by Canadian insurance companies, combine investment and insurance features. Segregated funds provide investment opportunities similar to mutual funds, which pay at least a guaranteed value on death and maturity similar to insurance contracts. These guarantees come with higher fees, but provide peace of mind and protection, especially in volatile markets.

Why Segregated Funds Are Reliable in Volatile Times

Market volatility, a reality at the best of times, is higher than ever because of the current tariff and trade war. Segregated funds are an ideal vehicle that shields investors from the volatility.

Principal Guarantees

Segregated funds shelter the purchaser from market volatility by guaranteeing that 75% or 100% of the principal will be returned at the earlier of maturity (usually after 10 years) or death. This means that should the market crash, the purchaser is guaranteed that a significant portion of their capital is protected – an assurance not provided by traditional mutual funds. 

Creditor Protection

As an insurance product, segregated funds protect your investment from creditors under certain circumstances by shielding them from legal claims or bankruptcy proceedings.   This is especially important for business owners or professionals facing liability risks. ​This protection is conditional based on the beneficiary designation and the absence of fraudulent intent.

Bypass Probate

Segregated funds, based on the beneficiary designation, also allow the proceeds to bypass the costly and lengthy probate process and be paid directly to the beneficiary upon your death. This can be a major advantage during volatile times, ensuring your assets are quickly and efficiently transferred to loved ones, avoiding additional financial stress and delays​.

Potential for Growth

While providing strong downside protection, segregated funds provide participation in the growth of the underlying markets. This means you do not have to sacrifice long-term investment gains for safety; you can benefit from market recoveries while still enjoying guarantees during downturns​.

Reset Options

As an added bonus, most segregated fund contracts allow you to periodically “reset” your guarantee to a higher amount if the market value of your investment increases. This feature lets you lock in gains during market highs, which then become the new baseline for your guarantee, providing both flexibility and enhanced security as market conditions change​.

In times of economic turbulence, the above features mean segregated funds can help manage risk while keeping you invested and positioned for recovery when markets rebound.

Conclusion

Segregated funds are not just another investment product – they are a strategic way to balance protection and growth, especially when the economic outlook is uncertain. If you want to explore whether segregated funds make sense for your situation, Differentiated Solutions is here to help. Contact us to learn more about how we can protect and grow your wealth, no matter what the markets do next.