When a mechanic is fixing your car, it’s probably a good idea for that mechanic to have as many tools he can. Your car is a complex system with many moving parts that, when working properly, takes you to your destination.
When you and your advisor are putting together your financial tools to reach your retirement destination, it’s also a good idea to have as many tools working for you to give you the best chance to reach your goal.
With conventional investments, the structure of the tools is fairly uniform… mutual funds.
In the Exempt Market, the structure of the tools varies, which in a lot of ways provides a complementary relationship for the overall tool kit. Here are a few tools to help the drive to your retirement destination be as smooth as possible…
Mortgage Investment Corporations (MICs) are investment structures that collect money from investors and then lends that money out in the form of mortgages. These investments are generally lower risk with the protection of the capital coming from the collateral. Unfortunately, these investments pay dividends that are taxed as interest income, so it will take the full brunt from Revenue Canada.
Flow Through Shares are special type of share that allows certain expenses to “flow through” to the end investor. Companies in the mining, oil and gas industries will use these structures to obtain capital to fund their operations. The strongest elements of these types of investments are their tax effectiveness. One of the best ways to minimize your tax bill is utilizing flow through shares.
Real Estate Income Trusts (REITs) are a way to participate in real estate, without having to collect late rent cheques or clean toilets. The good manager of the REIT will manage the asset while ensuring that it is in good order and revenue is coming in on a consistent basis.
Private Equity allows investors to be part of the ownership of an operating company through structures such as preferred shares or limited partnership units. Companies who are looking for growth capital, finance assets or to buy out competitors will often come to the Exempt Market to fund their initiatives.
These are just a few types of investment tools in the Exempt Market. Future articles will include more types and the benefits associated with them.
Marty Gunderson is a self proclaimed Exempt Market geek. He has served in a variety of leadership positions in the industry, from sales to issuer to dealer. He is the founder of www.BetterReturns.ca, a site that highlights a few quality exempt market offerings. To contact Marty, please email marty (at) idealeader.ca