Which of the following is an essential characteristic of segregated funds?

Segregated funds are unique investment vehicles primarily offered by insurance companies, and one of their essential characteristics is that they provide a guarantee on the principal investment. This means that, regardless of market fluctuations, the investor is assured of receiving a minimum amount back, typically at least the initial principal, upon maturity or in the event of death.

This guarantee is particularly attractive to conservative investors who want exposure to the market through mutual fund-like investments while still having a safety net for their principal. The specific terms of the guarantee can vary between products, with some offering guarantees that increase over time or have other features, but the fundamental premise is that they protect the investor's initial capital.

The other options lack alignment with the core principles of segregated funds. They are not fully regulated by the stock exchange, as they are primarily regulated as insurance products. Segregated funds can be purchased independently and are not required to be combined with stocks, plus they actually do allow for beneficiary designations, which differentiates them from traditional mutual funds and makes them favorable for estate planning.