New Purchases – TMC and AI

Last week I invested roughly $5K into two new companies: Timbercreek, and Atrium. Both are mortgage backed securities called MICs and trade publicly on the TSX.


Timbercreek (TMC) is based out of Ontario, where it conducts most of it’s lending business. TMC recently lowered its interest payout to 7.8% a year, which is still pretty attractive 🙂 Its CEO recently said “Given our primary objective is preserving capital, we believe it is prudent at this time to reduce our payout to maintain credit quality rather than increase risk in the portfolio.”


Atrium (AI) has most of its portfolio in first mortgages. Its average loan to value ratio is only 64% so a small correction in Canada’s real estate market should not affect the company’s principal investments. Atrium currently pays 7.3% a year.


My new investments are generating $364 every year 🙂 That’s like $1 a day of passive income 🙂 #Winning! Some readers might be thinking “Yeah, but you have money to invest, Liquid. What aboot the rest of us who don’t have $5,000 to buy these MICs?” Well hold on to your toques because I didn’t have any money to invest either. In my latest net worth update I revealed that I only had $800 in cash. So here’s my secret – I used a retirement plan loan to buy these new stocks 🙂

I’m not sure if other countries have something similar but in Canada any major bank can give people short term loans to invest in their retirement accounts. These loans generally have to be paid back within a year via monthly installments. To get a retirement plan loan simply walk into your local bank, ask to take out an RSP loan, and a financial representative will help you complete the application. An RSP is Canada’s equivalent to the an IRA in the U.S. or SIPP in the U.K. I believe.


Earlier this month I got a $11,000 RSP loan at 4% interest rate. I’ve used $5K of this loan to buy the MICs, and plan to use the remaining $6K to buy some bonds later. But for the purpose of today’s post all we need to consider is a $5,000 loan.

So if we can easily borrow $5,000 at 4% interest, and then use that money to generate over 7% return from a couple of MICs, then that means we can still keep the difference of ($364-$200) $164, as profit 😀 It goes without saying that we should only borrow what we can afford to repay. I’ve been using RSP loans every year since 2010 and it’s really sped up my retirement savings!

But this plan does come with risks. First there’s the risk of not being able to pay back the RSP loan. Luckily this risk is reduced every month until the loan is completely paid off within one year. Then there’s the risk of the investments. A publicly traded MIC is like any other stock and we could technically lose all our money if the share price drops to zero. That’s very unlikely to happen given its mandate to preserve investor’s capital, but anything is possible 😕 Thankfully MICs are less volatile than other stocks in general. According to Google, the Beta for Timbercreek (TMC) is just 0.13. This means it only moves 13% as much as the S&P/TSX Composite. Here’s a graph comparing the last 6 year performance of TMC and the TSX Composite.


Judging by the graph I think history suggests that buying some MICs now would add stability to our portfolios and create lower volatility if another large recession hits. I suppose in a way borrowing money to invest, and using 100% leverage can actually decrease our financial risk because in this case it mitigates our exposure to a potential market correction. So when it comes to risk management, investing other people’s money isn’t necessarily a bad idea 😉

The $5,000 RSP loan will be paid off after one year. But our MICs shall continue to generate income for us, which by then will be $27/year more than the previous year thanks to monthly compounded interest. So it’s not hard to imagine that we could easily create $12,000 of annual passive income after consistently repeating this strategy every year for a couple of decades or so. Not a bad retirement plan eh? 😀

Investing is the great equalizer of wealth. It doesn’t matter if you’re rich or poor, self employed or office worker, have tons of savings or have tons of debt, because anyone can start making $164/year of pure profit today without using any of one’s own money, and continue to build an increasing stream of income, year after year, without doing any work.

If you’re not comfortable using short term loans to finance investments then this strategy may not be for you. But if the idea of getting rich using other people’s money sounds fun and exciting, then feel free to consult with a financial professional about this strategy. You can also put half the money into MICs, and the other half into REITs for more diversification.

Random Useless Fact:

This is a Jewel Caterpillar which lives in the Amazon rainforest. It’s translucent body makes it look like a sweet, gummy treat 😀


Notify of

Inline Feedbacks
View all comments
07/23/2014 5:05 am

I actually just called my bank to ask if I can use an RSP that’s just sitting there and convert it into an investment RSP. They said I could so this week I will be transforming that and putting the money to “better” use.

Finance Journey
07/23/2014 9:06 am

I like the concept of amplify our return in a smart way using borrowed money :d . Keep it up!

I would like to add two points about MIC here for new investors.

First one, income from MICs are taxed in your margin tax rate. So, ensure keep them in a registered accounts such as TFSA or RRSP. My choice is TFSA. Second, MICs are very sensitive to interest rate as REITs.
I invested in MICs called Firm Capital Mortgage Investment Corp (TSE: FC), beta is 0.02.

Best Regards,

07/23/2014 11:50 am

Thanks for sharing your recent buys with us. That’s the beauty of this blogging community. The new ideas that flow from every post. I have to say, I never even looked at TMC or AI ever. Something to consider going forward.

07/23/2014 1:33 pm

Does the RRSP loan actually reduce your RRSP account’s balance until you’ve paid it off. Or is it entirely new capital?

Asset Grinder
07/23/2014 8:26 pm

Good yields you getting. Interesting way to make your rrsp work for u!

My Road to Wealth and Freedom
07/24/2014 2:35 am

Thanks for sharing this post Liquid and good luck with your new investment. I’m not really familiar with RRSP loans…Is the interest tax-deductible?

07/24/2014 2:57 am

Thats a bit too risky for me Liquid though I am rooting for you that it works out for you.
In the U.S. I think you can only take out a loan if its for a major event (first house or college type of thing) otherwise you cannot. Granted though I have not looked into them too deeply in the past.

07/24/2014 6:04 am

Weren’t you planning to start paying down your debt? I hope things do turn out well for you, but you don’t seem to be following your own instincts from a while ago to start focussing on paying off your enormous debt. I can’t believe you’re still borrowing even more money! To each their own but I have lived through some downturns and I would not be sleeping well at night if I were you.

07/24/2014 7:33 am

This is giving me an idea to take out a loan to contribute to my RRSP this year as I dont have any extra money laying around. Good luck on your investments 🙂

07/24/2014 8:47 am

I’m gonna say good luck to you on this one my friend, as I thought debt reduction was in your recent sights… It seems to me you have deviated from the KISS principle, Keep It Simple Smartguy, mantra I tend to live my life by. I understand leverage and it’s potential benefits, but I have lived through a few major market swings which is why I consider debt to be of concern and not something to think lightly of. Diversifying is great, but focusing on what works is better, my opinion of course. Maybe you’ve got more time to track your investments and learn about alternate ways to leverage, as I said using others money is great in good times, just don’t get stuck when they come asking for it back in bad ones… Your track record shows you have been able to do well in a generally up market (up since 2008 with a little dip in 2011). Time will tell if you can hold your own when troubled waters arise on the horizon, I’m curious to know if you will be able to keep your head above water or sleep comfortably at night. I believe you can, but… Read more »

07/25/2014 10:20 am

Two things you need to to to prepare for a downturn are things you don’t seem to want to do — pay off debt, and keep cash at hand. The way you’re set up now, how are you going to take advantage of a crash or correction? You will either be forced to sell something, potentially at a loss, or you will be unable to benefit from the correction, or worse. You need cash to be able to buy back in. So far you’ve been very lucky, but even with a moderate dip you are stuck. With a big dip, you are effed. Why take such a huge risk?? Especially for a measly 164 bucks a year!

07/26/2014 12:03 am

I have personal experience in down markets. I started dividend investing in 2007 well before the 2008/09 nose dive. Believe me, it was hard seeing every one of my positions, and I mean every position deep in the red. I did not panic, I did not sell one share. I kept with my game plan of buying stock every month regardless of market conditions. I felt I was buying only top quality companies that paid dividends and could always average down and ride out the storm. I never go all in with stock as I always have cash on the sidelines for a correction. Down markets, up markets, I just stick to my plan of monthly investing. Takes the guesswork out of should I wait or not invest question.

07/29/2014 1:34 pm

If you were really looking to capital on the next downturn, as Stephanie points out, you would be readying your balance sheet for a buying opportunity. The mantra goes sell high, buy low… The issue with trying to figure out when high and low markets are the tricky part, but you can bet that if your investments have been making money, it signals it is the time to be balancing your personal books. I’m sure you understand what we are outlining here, but time will ultimately show you what we mean. as another of my mantras goes, One must fail, to ultimately learn… and honestly you tend to not fail so much 😉 – cheers.


[…] July] I have just purchased 2 additional MIC funds. This time, publicly traded ones on the Toronto Stock Exchange. […]

11/18/2015 5:12 pm

The new MiC picks looks interesting. I too have limited exposure to TMC, but its not going to move the needle in terms of income since I started with a small sum. The idea of using low-interest funds to invest a sizable sum to generate decent yields above cost of funds looks interesting to me. I have a question here – Is the RRSP loan available for people who already have money in RRSP ? Is it like taking a loan against your own money – if it is so would it be better to invest one’s own cash (no interest payment)? In second question I’m assuming I want to avoid leverage and play safe.

I prefer to hold MICs in TFSA to avoid taxes on dividends. At some stage if I max out the TFSA Is it a good idea to hold MICs in non-registered account?


[…] invest in stocks, but smarter people invest in bonds ? Then earlier this month I wrote about taking out a loan and have dedicated some money to buy bonds […]