A segregated fund, or "seg fund," is an insurance contract that covers risk while producing an investment return.

Like a mutual fund, a seg fund pools investors' money so it can be managed by a professional and provide a good return. Unlike mutual funds, seg funds guarantee either 75% or 100% of your principal. A small part of the fund's assets goes to insure there will be enough cash to pay that guarantee.

Seg funds have some other advantages over mutual funds, including creditor protection. Like all insurance contracts, they allow you to name a beneficiary. After your death, the fund is paid to the beneficiary without tax or probate.

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