Segregated funds were initially developed by the insurance industry to compete against mutual funds. Today, many mutual fund companies are in partnership with insurance companies to offer segregated funds to investors. Some unique benefits that are not available to mutual fund investors are offered by segregated funds.

These are the major benefits that are not offered by the traditional mutual fund but are offered by segregated funds.

A guarantee of principal upon maturity of the fund or upon the death of the investor is offered by segregated funds. This means that even if the market value of the investment has declined, there is a 100% guarantee on the investment at maturity or death, though this may differ for some funds, minus any withdrawals and management fees. Having a maturity of 10 years after your initial investment are most segregated funds.

Segregated funds also offer creditor protection. If you go bankrupt, then creditors won’t be able to access your segregated fund.

Estate probate fees are avoided by segregatd funds upon the death of the investor.

A “frozen option” which allows investors to lock in investment gains is what segregated funds have and this can increase their investment guarantee. During volatile capital markets, this can be a powerful strategy.

Segregated funds also offer the following less important benefits:

A T3 tax slip each year-end is issued by segregated funds and this reports all gains or losses from purchases and redemptions that were made by the investor. This makes calculating your taxes very easy.

Segregated funds can serve as an “in trust account,” which is useful if you wish to give money to minor children, but with some strings attached.

The basis of how long an investor has invested in the fund during the year is where segregated funds allocate their annual distributions on instead of the basis of the number of units outstanding. Because of mutual funds, an investor can immediately incur a large tax bill when a capital gain distribution is declared at year-end if they invest in November.

A lot of marketing and publicity has been surrounding segregated funds as well as how much value should be placed on their guarantee of principle protection. During any 10-year period since 1980, there have only been three very aggressive and specialized funds that lost money in the entire mutual fund universe. This means that there are extremely low chances that you will be losing money after 10 years. It can cost as much as percent per year in additional fees if you decide you need a guarantee.

But these guarantees can be very worthwhile with further market volatility. Don’t forget that most major mutual fund companies also offer segregated funds.

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When you determine the business cycle the economy is currently in, researching for a trade is what you can do next. Having some sort of system in place that will be used is considered the best option before each trade. Here is a simple 5 Step formula to help get you started.

Here are the 5 Steps to Investing Online

Finding a Stock In stock trading, this is the most obvious and the most difficult step. Because there are over 10,000 stocks to trade, the time of the year is a good rule of thumb to consider.

Fundamental Analysis Many short term traders may disagree with the need to do ANY Fundamental Analysis, however knowing the chart patterns from the past and the news regarding the stock is relevant. An example would be earnings season. Caution could be in order if you are planning on playing a stock to the upside that has missed its earnings target the last 3 quarters.

What are the Technical Analysis? This is the part where indicators come in. Whether lagging or leading, the batch of indicators you choose may depend on where you get your education.

Keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses. Getting very comfortable using one or two indicators first would be a good idea. Learn their intricacies and you’ll be sure to make better trades. Why you should follow your picks When a few stock trades have been placed, your next step is to manage them properly. If the trade is meant to be a short term trade watch it closely for your exit signal. If it’s a swing trade, then the indicators telling you the trend is shifting is what you should watch out for. Setting weekly or monthly checkups on the stock is what you can do if it’s a long term trade.

This time can be used to keep abreast of the news, set stop losses, determine your price targets, and keep an eye on other stocks that you may want to own as well.

Knowing the big picture As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor. For example, if you are long (expecting price to go up) on an oil stock and most of the oil sector is rising then more likely than not you are on the right side of the trade. Several trading platforms will give you access to sector-wide information so that you can get the education you need.

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