LLQP Segregated Funds & Annuities · Component 2.1 · 30% of the exam
Which fund type best suits a client who needs the money within one year?
- AAn emerging markets fund, since one year is long enough to capture its higher expected return
- BA broad equity fund, since diversification across many companies limits the loss over twelve months
- CA high-yield bond fund, since the coupon income cushions any decline in price over a short period
- Money market or a short-term guaranteed interest option, since stability and liquidity matter most
Correct answer: D) Money market or a short-term guaranteed interest option, since stability and liquidity matter most
Horizon dictates fund type. One year is too short for any fund with meaningful volatility.
Why the other options are wrong
- AEmerging markets funds have the highest volatility, unsuitable for one year.
- BEquities are too volatile for a one-year horizon.
- CCredit risk and volatility make it unsuitable for short-term money.
Exam tip
Under one year → money market/GIA.
Common mistake
Chasing return for short-horizon money.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.