With inflation making a comeback, investors now find themselves facing a new challenge: how can they protect the future buying power of their savings? For many, the answer might involve seeking higher returns, but this could also entail a higher level of risk.
A solution to this dilemma could be the guaranteed investment fund, or GIF. These are available from insurance companies and have three main features.
First, they include insurance that guarantees all or part of the invested capital. To benefit, the investor must hold the fund until maturity or death.
Many GIFs also have a feature allowing investors to reset the guaranteed amount when the fund increases in value. This means that gains can be locked in. In this case, the fund’s maturity is also reset to a later date.
As well, being an insurance product, guaranteed investment funds offer a high degree of creditor protection.
Lastly, they can be a useful tool for estate planning, since the bequeathed capital is guaranteed and the death benefits can generally be distributed to the beneficiaries promptly, without going through the estate settlement process.
Note that some conditions apply, and that management fees include the cost of insurance for the invested capital.
If you think that a guaranteed investment fund might fit into your financial toolbox, talk to your advisor.
The following sources were used to prepare this video:
Autorité des marchés financiers, “Segregated funds.”
Finance et investissement, “Fonds distincts : les garanties 75/75 en vogue.”
Get Smarter About Money, “Segregated funds explained.”
Investment Executive, “Seg funds 101.”