Early on in your journey into alternative investment options, you likely came across the term Mortgage Investment Corporation (MIC). MICs have entered the spotlight in recent years as a key piece in both the wealth accumulation and the wealth preservation strategies of a variety of investors. This surge in popularity can be credited to the many advantages this investment format has to offer, such as reduced risk through diversification, as well as strong and reliable rates of return.
So, how do you select the right Mortgage Investment Corporation?
Choosing which MIC is right for you is not as simple as who has the highest Return on Investment (ROI). In this article, we’ll discuss five investment factors to consider when selecting the right MIC.
Here are 5 factors to consider when deciding to invest in a Mortgage Investment Corporation
- Liquidity
Read the subscription agreement closely to see how quickly you can withdraw your investment. No one wants to be in a situation where they need access to capital but are stuck in a long waiting period to withdraw an investment, and some MICs will only allow redemptions once per year.
- Consistency
Ask for information on the actual ROI vs. the target ROI of the past 5-10 years. This will give you a sense of how accurate the MIC is at estimating ROI and indicate if the MIC can consistently meet or exceed target ROIs. While macroeconomic factors such as the Bank of Canada rate directly affect MIC ROIs, it’s still vital to look for trends in the data to determine the growth trajectory of a MIC.
- Risk
Learn which housing markets you are investing in and what types of mortgages your money is financing. The specific housing markets and types of mortgages that compose a MIC’s portfolio, whether urban or rural, first mortgage loans or second mortgage loans, are important factors that go into how a MIC determines interest rates and subsequently the potential pitfalls associated with an investment. You should find a MIC whose acceptable level of risk matches your own.
- Reward
Ask when and how dividends are distributed, especially if you plan to reinvest the dividend in the MIC, as the investment is compounded based on a predetermined schedule. Not all MICs issue dividends on the same schedule; some issue monthly, some quarterly, and others annually.
- Communication
Prudent investors keep tabs on their investments, and prudent MICs know that the best questions are the ones shareholders shouldn’t have to ask. Check to see not only that the MIC reports with clarity and regularity, but that they can handle ad hoc requests for information. You never know when you’ll need to be able to access relevant details related to your investment at a moment’s notice. Your prospective MIC should have an investor relations manager ready to answer questions, provide additional information, or help you understand the product.
Investing with Magenta
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind. Magenta has delivered strong returns and reliable income to our investors while safeguarding capital by applying a risk-mitigated portfolio strategy. The portfolio is constructed of residential, primarily first mortgages, located exclusively in carefully selected Ontario markets.
Investing with Magenta offers:
- Flexibility
- Liquidity
- Regular income
Like this blog? Be sure to check out our “What is a Mortgage Investment Corporation (MIC)?” blog. For more content like this, explore more investment blogs by clicking here.
Disclaimer
The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.