Newsletter

Your Financial Security – Issue 1, 2013 Who says investments don’t come with guarantees?

By on Sep 10, 2013 in Newsletter | 0 comments

Segregated fund policies: the solution that can help protect your capital The last few years have been challenging for investors. Market turbulence has caused many to avoid equity investing because they fear market declines. While they desire portfolio growth, they remain nervous about market performance. The return of their initial investment capital is just as important to them as return on their money. If this describes you, segregated fund policies may be the investment solution you’ve been looking for. Like a mutual fund, a segregated fund is a pool of money invested in a variety of securities through professional fund managers. However, unlike mutual funds, segregated funds are only available through an insurance company. Because segregated fund policies are life insurance contracts, they have special protection features. Maturity and death benefit guarantees Individual segregated fund policies protect part or all of your capital investment mitigating some risk to your investment by offsetting the possible effects of market fluctuations at specific times. You can choose to guarantee either 75 or 100 per cent of the investment’s market value or the guaranteed amount – whichever is higher – at the maturity date or upon notification of death (upon death the proceeds pass to the named beneficiary). So if the market declines significantly, you receive the guaranteed amount. If the market goes up significantly, bringing the value of the investment up too, you receive the market value. Withdrawals proportionately reduce maturity and death benefit guarantees. Resetting to lock in market gains You can also opt for resets, which essentially lock in market growth from year to year; increasing the guaranteed amount when market value increases. Resets improve downside protection provided by maturity and death benefit guarantees because they capture market upswings. It’s done automatically on the policy anniversary if the market value of the segregated fund policy is greater than the maturity or death benefit guarantee amount. Maturity guarantee and death benefit guarantee reset options are available at an additional fee and must be selected at the time the application is signed. Maturity resets can occur up to 15 years prior to the maturity guarantee date and death benefit guarantee resets occur up to and including the last policy anniversary prior to...

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Your Financial Security – Issue 2, 2013 Staying on track to achieving your investment goals

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The volatile ride in equity markets and the uncertainty of the global economy may have you feeling weary and questioning your investment decisions and your portfolio. Here’s some insight into today’s equity market conditions, what’s happening with them, and how to confidently reach your investment goals by sticking with them over the long term. Equity markets: big picture view With ongoing concerns, many investors are expressing desire to get out of equities. The media has a big influence in shaping perceptions. If you’re wondering what the reality is, it’s been a case of two steps forward, one step back. Clearly there’s no shortage of macro-economic challenges. However, the fundamentals of the companies that make up the stock market show a much brighter picture. Over the 10-year period ending March 31, 2012, the S&P 500 rose by a total of 23 per cent, but its company earnings grew by 130 per cent. In other words, there’s inherent value in the companies that make up the stock market, which isn’t necessarily reflected in the share price. Bottom line: there’s a lot of opportunity for equity investors to harness growth potential over the medium to long term to capture returns in their portfolios – for those with patience. Fixed income – safe-haven investments? With all the challenges and worries in the markets today, it’s easy to understand why investors are attracted to perceived safe-haven investments. And for many, that’s been fixed-income investments. Investors have become accustomed to very attractive returns in the Canadian bond market over the past decade, in the range of six to seven per cent. Now, in sharp contrast, returns are down in the two-per-cent range. There are two challenges for bonds with the current low-yield environment: With interest rates as low as they are, investors aren’t likely to see the same results they’ve been used to. And really, bond yields don’t have much room to go any lower. In an environment where interest rates could rise, bonds are likely to show negative returns. And the longer the term of the bond, the greater the risk and impact. Diversification is just as important among your bond funds as it is for equities. Over the past decade, we’ve seen several...

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