How MICs Fit in TFSA and RRSPs
As an investor, you can hold shares of a Mortgage Investment Corporation (MIC) in your registered account—be it TFSA, RRSP, RRIF, or RESP. As a shareholder, you are entitled to dividend payouts from the fund. Due to their corporate structure, MICs do not pay income tax and are legally mandated to distribute all their earnings to shareholders. MICs are also required by law to keep at least 50% of their holdings in mortgages backed by residential real estate. But, mortgage lending is not risk-free, as borrowers can default. This risk is managed by leading MICs through careful balancing of leverage, ensuring the portfolio is geographically diversified and having strong underwriting processes.
Like other assets, MICs can become a key part of your registered investment portfolio. They can provide recurring dividend payments that can be cashed out or reinvested for compound growth. Leading MIC funds offer a Dividend Reinvestment Plan, or DRIP, which allows investors to reinvest their dividends by purchasing additional shares of the MIC fund rather than receiving the dividend payment in cash. This strategy enables a compounding rate of return over time.
From a tax perspective, earnings on a MIC investment are treated just as any other asset within your registered fund. In the case of a TFSA, returns can be withdrawn without any tax penalties. With respect to RRSPs, earnings are tax-deferred until you start making withdrawals.
One of the best ways to get started in the mortgage market is to work with an experienced investment corporation. CMI Mortgage Investments offers individuals and corporations a family of three diverse funds that meet various risk and performance profiles. Learn more about how CMI MIC Funds can offer seamless exposure to Canada’s real estate markets.
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