A: Best? Uh, I don’t think so. I do understand the appeal though. Segregated funds, like mutual funds, offer the potential for growth. They usually also provide a maturity guarantee of at least 75%, so that when your deposit matures you’ll receive a top-up payment if the market value has fallen below a certain level. But you pay for that insurance contract with a higher management expense ratio (MER)—it could be upwards of 3% or more versus the average mutual fund MER of 2.3%—and that higher MER can put a big dent in your returns. Plus there can be penalties for withdrawing your money early. I would get clear on your investment objective. If you want capital protection, buy a GIC. If you want growth, buy a low-fee balanced mutual fund. And remember the RIF withdrawal requirements, so choose a product that makes that easy.
Bruce Sellery is a frequent guest on Cityline, and also writes for Today’s Parent and Chatelaine. Do you have your own personal finance question? Write to us at email@example.com