A guaranteed fund provides certain form of guarantee to investors, usually on the capital invested or on a minimum rate of return, and thus, offers greater security against market fluctuations. Guaranteed funds have the following features:

Conditional: Generally, a minimum investment period and/or withdrawal restrictions apply for guarantee to be effective.

Charges are usually higher: Besides basic charges, the guarantor usually imposes an additional guarantee fee or reserve charge.

Lower long-term returns: The long-term returns of guaranteed funds may not outperform the market, and can fall behind the inflation rate. If members invest in low-return guaranteed funds over the long run, they may sacrifice the chance to secure better returns, which will be exacerbated by compounding effect.