Building an Allocation

Education first, construction second

This page teaches portfolio-construction concepts for investors who already understand what a MIC is.

It is not a recommendation to buy any MIC, blend, or allocation percentage. Suitability is personal. Offering documents govern. Compliance review is required before any specific product claims are published or used in advice.

The wrong way to build a MIC allocation

1. See a target yield
2. Compare it to a GIC rate
3. Move a large amount quickly
4. Call it "fixed income" and stop thinking

That process optimizes for speed and regret.

The right questions in order

1. What job must this capital do?
2. What risks am I explicitly accepting?
3. What liquidity budget do I have?
4. What account location makes sense?
5. What size is meaningful but non-lethal if stressed?
6. How does this interact with assets I already own?
7. Only then: which professionally filtered MIC exposures: if any, might fit?

Notice that product selection is last.

Sizing heuristics (educational, not rules)

Investors often think in bands rather than precision fantasies:

• Too small: operational hassle without portfolio impact
• Material: changes income mix or diversification in a noticeable way
• Too large: liquidity or concentration risk begins to define household outcomes

A useful stress question:

If this entire allocation were gated for a period, what in my life breaks?

If the answer is "nothing critical," size may be in a rational zone. If the answer is "tuition / tax / buyout / living costs," size is too large or liquidity buffers are too thin.

Correlation and concentration (the hidden double-count)

Canadians who own personal residences, rental properties, and then add residential-mortgage MICs can accidentally stack the same economic cycle.

That does not forbid MIC exposure. It demands conscious sizing.

Ask:

• How much of my net worth already depends on Canadian housing health?
• Am I diversifying within real estate finance, or amplifying it?
• Do I have income sources outside housing-linked credit?

Diversification is not the number of account statements you receive. It is the number of distinct ways you can be hurt.

Blended construction as an idea (not a promise)

Some investors evaluate more than one MIC because different managers emphasize different parts of the lending spectrum, for example, a more conservative residential-bridge emphasis versus a broader specialized lending history.

Educationally, blending is an attempt to diversify manager risk and mandate risk, not a guarantee of higher risk-adjusted returns.

Any public discussion of specific MIC pairings must:

• Remain suitability-gated
• Use current, compliance-approved metrics only
• Avoid implying that a blend removes risk
• Treat historical distribution continuity as history, not destiny

If this hub later references specific managers (such as those Diversifi currently filters), those sections must be reviewed against live offering documents at publish time.

Reinvestment vs cash distribution

Investors should decide deliberately:

• Cash distributions: support income needs
• Reinvestment: compound inside the sleeve (where available)

Retirees often prefer cash. Accumulators often prefer reinvestment. Corporate accounts vary.

The choice changes liquidity planning and behavioural experience.

Monitoring cadence after you invest

A serious allocation has a calendar:

• Distribution tracking
• Periodic statement review
• Annual (or more frequent) suitability refreshes as life changes
• Re-read redemption policy when cash needs change
• Watch for mandate drift in reporting
• Reconfirm concentration against the rest of the portfolio

Set-and-forget is how private-market allocations become forgotten risks.

A simple construction worksheet

Complete in writing:

1. Job of capital: __________
2. Max allocation ($ and %): __________
3. Liquidity buffer outside MIC: __________
4. Account: __________
5. Distribution handling: cash / reinvest
6. Review date: __________
7. Walk-away triggers: __________
8. Family member who understands the file: __________

If you cannot complete this worksheet, you are still in education mode, which is exactly where you should be.

Suggested next page

Glossary: shared language so conversations stay precise.