Mortgage investments becoming a more mainstream investment option for individual and institutional investors alike. Making money on debt never gets old but keeps evolving into many intricate vessels. Investing into a MIC can bring potential high-income opportunities. However, MICs have their risks too.
A MIC manages a diversified pool of mortgages from various investors and earns from the ongoing interest payments. Often, MICs are merely sought for their diversification element but there are numerous other benefits as well. These include:
All investments carry risks, and not all MICs are the same or equal in function. Here are some risks to consider when investing in a MIC:
This highlights the need to partner with a reputable MIC that has a proven track record of returns and responsible management.
A successful MIC focuses more on risk management, a strong management team, and high-quality assets. Yields will be enhanced over the long-term when all these qualities are strengthened and maintained.
Investors should not be impulsive in their search for portfolio diversification. Always study the nature and state of the housing market where the MICs are concentrated. Toronto and Vancouver are still the top choices in spite of the current changes in policies.
When looking for MICs, consider minimizing the benefit of tax mitigation where holdings can be provided in registered savings plans, including, RRSP, RDSP, TFSA, RESP, and RRIF.
You don’t make money on your shares appreciation, but instead, you earn a dividend that pays out every month or depending on the corporation’s rules (some pay quarterly or yearly). As you might have guessed, dividends increase with the increase in your shareholdings.
Hunting for yield comes with an element of risk, and so investors must be well-prepared before delving into any MIC. Taking into consideration all the risks and benefits of mortgage investments. With all that in mind, they are a compelling investment vehicle.
Do not hastily jump into any MIC investment, instead, assess your risk and reward profile and align those with a set of investment goals. Stick with your goals regardless of the current market conditions by making sure that your finances are at minimum risk. Ask a specialist for more professional advice.