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Don’t Let Investing be a Popularity Contest

20 December 2013

In the past we’ve talked a lot about the drawbacks to investing in an MIC. That’s the fact that they are typically much longer investments than investing in private mortgages, and they also have very little protection for the investor in case of default. But in addition to being one of the riskier investments you can hold in your portfolio, you may also not even be able to invest in MICs for too much longer.

The reason for this is that there’s been a huge uptick in the popularity of MICs (mortgage investment corporations,) in the past couple of years alone. So what’s bad about that? After all, something that becomes very hot – especially in the area of investments – is usually a good thing, right? Well, sometimes. But in the case of MICs and their recent growth, that popularity is actually bringing too much cash in, and the MICs don’t have anywhere to put it. In these cases, which are happening more and more often, the MIC actually stops taking new investors, because they have no more mortgages to place them into.

This problem stems from the fact that MICs have the mortgages first, and then look for investors to fill them in. Once those mortgages are all being supported by investors, the MIC simply doesn’t need any more cash flow coming from investors. This is the problem that investors just wanting to get in on the MIC party are now experiencing.

Luckily, there is another way to invest in mortgages and that’s by simply investing in one private mortgage, found for you through a private mortgage broker. Brokers always have clients looking for private mortgages, and there are always individuals looking for mortgages. However, because the mortgage isn’t obtained until you supply it, there’s no need to worry about running out of investment room, or the broker no longer having any need for your investment.

MICs did enjoy a brief surge in popularity, but it didn’t take long for many investors to find out why they’re not the best way to go. In addition to insecurity and very little protection for investors, they simply may not be around for too much longer. Because investing directly into private mortgages is so vastly different, thankfully that’s not the case here.

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