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About Volatility

Updated May 26, 2020

At Advanced Capital Corporation (or "ACC") one of the questions that we often field from existing and prospective investors is about how the return on preferred shares in Advanced Mortgage Investment Corporation (or "AMIC") compares to typical stock market returns.

We turned to Marvin Cajina, CPA, CA, who serves as Director, Corporate Accounting of the Advanced Group of Companies, to help us explore the comparison between AMIC returns and the returns of two well-known stock indices, the Dow Jones Industrial Average (or "DJIA") and the S&P 500/TSX). 

It should be noted that in no way are we comparing features of the investments (like liquidity or sector concentration or time horizon). We just wanted to examine how AMIC's returns compared to the indices on a paid-up capital basis.

We started by looking at an actual AMIC investor who invested $10,000 at inception and who reinvested their dividends in full each month. We compared AMIC's actual return on that $10,000, month over month, against the return on $10,000 invested at the same time in the DJIA and S&P 500 (with full reinvestment of dividends). Here's what we saw:

Life-to-Date Internal Rate of Return Comparison - Compounded Monthly (AMIC/DOW Jones/S&P 500)

What we see above is that AMIC shares (which pay fixed dividends monthly plus a top-up dividend once per year) had steady income without the month-over-month volatility that the indices experienced.

That led us to ask: how does the true return in paid-up capital compare over those five years?

A dollar invested in AMIC at inception (with full reinvested dividends) earned less than the same amount invested in either index over the same period of time and also with full reinvested dividends.

In this analysis, we are not taking currency fluctuations or any trade-related fees for the stock indices into account.

Life-to-Date Rate of Return Comparison Including Compounded Dividends (AMIC/DOW Jones/S&P 500)

We noticed that at times, the ongoing volatility of the stock market resulted in AMIC outperforming the indices.

The chart below compares a hypothetical $10k invested in AMIC to $10k invested in the indices over recent months.

1 Year Rate of Return Comparison - Including Compounded Dividends (AMIC/DOW Jones/S&P 500)

AMIC would not be able to expect or predict that it will at any time outperform the stock markets. However it can be seen that AMIC's returns have lacked the volatility of the public markets while still achieving a respectable rate of return.

For more information about AMIC, please email info@advancedcapitalcorp.com to request an appointment or call (613) 274-0055 to speak with one Advanced Capital Corp.'s registered dealing representatives. Shares in AMIC may not be suitable for you. Your dealing representative will be able to assist you in completing a Know-Your-Client review to determine if AMIC shares match your investment goals and risk tolerance.

References

  1. Dow Jones Return Calculator, Dividends Reinvested. Source: https://dqydj.com/dow-jones-return-calculator/
  2. S&P 500 Return Calculator, with Dividends Reinvestment. Source: https://dqydj.com/sp-500-return-calculator/