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Preet Banerjee, B.Sc., FMA, DMS is a former stockbroker and financial advisor in Toronto. Information on this site is for entertainment purposes ONLY. Always seek individual professional advice before making any financial decisions.

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Tax Advantages of Segregated Funds versus Mutual Funds

November 25th, 2009 • Related • Filed Under
                                                         
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Following from yesterday’s post on year end mutual fund distributions, I should point out that Segregated funds (which are very similar to mutual funds in that they are essentially investment funds but with certain guarantees on capital over time or upon death) are markedly different. Specifically:

1. Segregated funds (seg funds for short) can flow through capital LOSSES to the contract holder. These capital losses can be carried back 3 years, or forward indefinitely. Mutual funds cannot do this.

2. Seg fund distributions can be time-weighted (it depends on the company in question). This means that if you invested for only two months, you will get 2/12ths attribution on the distributions (interest, dividends or capital gains). This does not exist for mutual funds. Again as noted yesterday, if you invest in December before the year-end distributions are made, you could be taking on someone else’s tax liability.

These are not inconsequential differences!

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  2. Pingback by » Tax Advantages of Segregated Funds versus Mutual Funds … | The Best Mutual Funds on 26 November 2009:

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  4. Pingback by The Financial Blogger » Blog Archive » Financial Ramblings – I Feel Like having the H1N1 Edition on 29 November 2009:

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  5. Comment by rajiv verma on 1 December 2009:

    Hi Preeet

    Like your way of explaining complex financial information in a simple way..i mean speaking a common man’s language..Congratulations
    Rajiv

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