CI Guaranteed Retirement Mutual Fund - REIT and MIC Comparison for DIY Investors

The last post compared CI Investments G5|20 mutual fund to a lowly GIC and found that for the flat market scenario, a GIC could actually outperform the fund!

For background, the CI Guaranteed Retirement Cash Flow Series offers 5% cash flows for 20 years,  tax-efficient cash flows for non-registered accounts (outside your RRSP, TFSA, etc.), and the ability to participate in rising bull markets.  But there are other options to achieve steady, higher income beyond the super-safe GIC option.

Here we compare the fund to a REIT and the rising market scenario below (#1 , the golden yellow path):

Lets say the market goes up in the first 5 years at 6% per year compounded and consider $20,000 invested.  From year 6 (the first year of guaranteed returns), you could take out $1,262 a year for 20 years to deplete the funds that started at $25,250. See the chart to the left.

Alternatively, you could invest in a REIT, like Centurion Apartment REIT, and earn about 7.5% (that does not count capital appreciation).  In that case you could withdraw $1,873 a year - that's 48% more cash flow a year than the CI scenario #1 !

REIT distributions can also be tax-efficient return of capital, just the the CI mutual fund.  But the REIT's higher earnings mean the principal is not depleted so quickly and can pay out more.  Earning about 7.5% with the REIT and having inflation protection through capital appreciation of the underlying real estate means there are other options to the CI Investments G5|20 mutual fund that you could consider.

If you invest in a publically traded Mortgage Investment Corporation, a MIC, you could invest less than the REIT minimum amount, have good liquidity (just like the mutual fund), and earn even more than this REIT example.

Timbercreek Mortgage Investment (TMC on the TSX) distributes about 8.5% - it does not have the tax advantages of REIT distributions but in a registered RRSP or TFSA account that would not matter.  You could withdraw $2,928 per year from the MIC account - that's 132% more than the CI mutual fund.

This shows how critical extra percentages are in earnings over the long term.  No doubt the mutual fund fees eat into the CI fund return, setting it back in it's cash flow potential compared to other DIY investing products like the REIT or the MIC.