Segregated Funds and Annuities (SFA) Questions and Correct Answers the Latest Update
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Segregated funds
Institution
Segregated Funds
What is Segregated Funds
LLQP - SFA VL 01
Segregated Fund is also an investment. it is just a fancy version of mutual fund.
Segregated Fund is an insurance product, and it is an investment. Segregated Funds
offer some unique features that mutual funds generally do not, such as:
- Guarant...
Segregated Funds and Annuities (SFA)
Questions and Correct Answers the
Latest Update
What is Segregated Funds
LLQP - SFA VL 01
✓ Segregated Fund is also an investment. it is just a fancy version of mutual fund.
✓
✓ Segregated Fund is an insurance product, and it is an investment. Segregated Funds
offer some unique features that mutual funds generally do not, such as:
✓ - Guarantees
✓ - Ability to BY-Pass Probate
✓ - Creditor Proofing
✓
✓ A segregated Fund is a great product but remember it's not Life Insurance! rather,
it's an investment somewhat similar to a Mutual Fund.
✓ With the segregated funds, the funds must guarantee
✓ - A minimum of 75% if the investor's principle at death, or
✓ - Upon a 10-year maturity mark
✓ - Some Segregated Funds even guarantee as much as 100% at death or at the 10-year
mark.
✓
✓ As an investor, all the insurer is doing is guaranteeing what he put in.. what about
growth?
✓
✓ This guarantee is only for peace of mind. The investor does hope that they have
positive returns, but worst case scenario. they have some level of guarantee upon
death or upon 10-year maturity mark.
Sally and Jacob are married and have a new born daughter. Jacob will be the
only income earner in the family and currently earns $50,000 per year. What
would happen to their young family if Jacob dies permanently?
They have $200 available in their monthly budget and wanted to protect against
✓ 1. Purchase Life Insurance:
✓
✓ Based on his age, let's assume $200 per month would have purchased a $1,000,000
life insurance [policy.
✓ - Upon Jacob's death, Sally would receive death benefit of $1,000,000.
✓ - this would be enough If invested properly, it would likely replace Jacob's income so
Sally and father would be taken care of.
✓
✓ 2. Invest in a Segregated Fund:
✓ It has only been one month, so they would have been invested total investment of
$200.
✓ - The fund would guarantee a minimum of 75% of their total investment or current
market value.
✓ -The bottom line is, Sally would receive approx $200 which is clearly not enough
Assume that Amanda has $5000 in her bank account that she would like to
invest in a stock market for several years to achieve growth.
What issues could Amanda face when she only $5,000 to invest in the stock
✓ 1. Not enough knowledge/expertise to do the appropriate research
✓ 2. Even if she has expertise, she may not have enough time to pick stocks or it may
not be justified for small investment
✓ 3. Not enough money to achieve a fully diversified portfolio. Most experts would
state you need upwards of 20 different stocks in 20 different companies in order to
diversify a portfolio and $5,000 is not enough.
What is mutual fund?
LLQP - SFA VL 02
✓ 1. A mutual fund can be thought as a pot of money where many investors contribute
✓
✓ 2. Each investor obtains units of the fund based on how much he or she contributes.
✓
✓ 3. The fund manager invests the portfolio according to a specific mandate. For
example, if it is a equity fund, he would in invest in equity.If it is a bond fund, he
would invest in a bond.
✓
✓ 4. The investors can sit back and let the fund manager do their job.
✓
✓ 5. Profit or loss is determine by the amount contributed (how many units) and the
performance of the fund.
What are four advantages and two disadvantages associated with mutual fund?
LLQP - SFA VL 02
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