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Today I’ll dip into the question inbox and see what’s on readers’ minds.

NFI Group

Q – I’m concerned about the financial state of NFI Group Inc. (NFI-T). Is there a chance the company could declare bankruptcy? – Claude V.

A – Bankruptcy isn’t likely, but the company is in some financial difficulty. In the fourth quarter and year-end report released March 10, management said that lower trailing adjusted EBITDA combined with the company’s anticipated debt profile will affect its “ability to comply with certain financial covenants under its senior credit facilities.” This includes the interest coverage ratio in the near term and the total leverage covenant beginning in the second half of 2022.

The company said in a statement it is “in detailed discussions with its banking partners to obtain further covenant relief extending into the first half of 2023.″It added that management believes that “with the anticipated covenant relief, the company’s cash position and capacity under its existing credit facilities, combined with anticipated future cash flows and access to capital markets, will be sufficient to fund operations, meet financial obligations as they come due and provide the funds necessary for capital expenditures, dividend payments, and other operational needs.”

The bottom line is that management is hoping that banks will bail them out from a financial squeeze. That will probably happen, but this is not a situation any company, or its lenders, wants to contend with. – G.P.


Q - Will I lose my initial investment in mutual funds or just the amount that I made in the last year? I am on the verge of retirement and terrified. If the answer is yes, should I quickly switch my money into a GIC? Thanks so much for any help in answering these questions! – S.M.

A - I have no idea what mutual funds you own or how risky they are. There is no downside limit on any losses, but if you have invested conservatively, you should be okay. I never advise panic selling and the tax consequences can be severe. However, if you are truly terrified, consider selling some of your more volatile funds and moving to cash. - G.P.

Real return bond funds

Q – In the current inflation environment, are real return bond fund such as the Phillips, Hager & North Inflation-Linked Bond Fund good protection against inflation? - Jacques B.

A – This fund invests primarily in a portfolio of real return and inflation-linked bonds issued or guaranteed by the Canadian government. Technically, it could also buy foreign government and corporate bonds, but right now all the money is in Canada.

The fund was launched in June 2009. During most of the years since, inflation was very low, so it’s not surprising that the average annual compound rate of return since inception is a modest 4.6 per cent.

But it may come as a surprise that over 12 months to Feb. 28, while inflation was gathering strength, this fund posted a gain of only 0.5 per cent. In February, with inflation climbing, this fund dropped 0.2 per cent.

It’s not just this fund that’s struggling. The iShares Canadian Real Return Bond Index ETF (XRB-T) was down 9.4 per cent for 2022, as of March 24.

Why aren’t these real return bond funds working in the face of the worst inflation we’ve seen in decades? Because the underlying bonds have long maturities – an average of 17.18 years for XRB – and pay a very low return after discounting for inflation adjustments. For the iShares ETF, the real yield (the return adjusted for the effects of inflation) is 0.49 per cent. Would you want to tie up your money for more than 17 years for that rate of return?

Real return bond funds give the appearance of being a solution to the inflation problem. As the results show, they’re not. – G.P.

TFSA question

Q - We’re in the process of setting up a TFSA for my wife to take in her mandatory RRIF drawdown. We’d have to sell some TD shares, which are in the RRIF. But I understand they can be transferred to the TFSA. We’d like to keep them rather than selling, particularly since the Ukraine sell-off, and maybe sell them from the TFSA sometime down the track. – Maurice C., Sydney NS

A - You can’t transfer the TD stock directly from a RRIF to a TFSA. You can, however, take out some stock, either as a substitute for a regular payment or as an extra withdrawal. The value of the stock will be taxable. Then you can put the shares into the TFSA as a “contribution in kind”, assuming your wife has enough available contribution room. – G.P.

RRSPs and taxes

Q - My question might be a bit ‘101-ish’ but it’s something that I’ve never seen answered (or maybe asked).

When I contribute money to my RRSP and then invest in dividend-paying and DRIP-able stocks, do I have to keep track of capital gains, interest payouts, new shares acquired, etc. for each stock? And what if I choose to sell some/all the shares of a stock and purchase other shares with the gains, while keeping everything in the RRSP. Do I need to keep track of this too?

Or does it not matter how much or little I’ve gained/lost on each of the stocks within my RRSP? Because what is ultimately being taxed is the amount I withdraw in a tax year (deemed to be ‘income’ by the CRA) regardless of how my portfolio of stocks grew or what investment actions were taken.

Whew that was long-winded! But it’s been a question 20 years in the making! – Doug W.

A – You can exhale. All transactions within the RRSP are tax sheltered. No record keeping is required. As you say, for tax purposes the CRA is only interested in how much comes out of the plan, not how it got there. – G.P.

Capital gains

Q - Is the gain realized from the Canada/U.S. exchange rate tax exempt if I sell my stock? – Keith M.

A – No. For tax purposes, every foreign transaction is converted back to Canadian dollars, using the Bank of Canada’s exchange rate that was in effect on the day of the transaction. If there were transactions at various times during the year, you can consult the monthly or annual exchange rates at Exchange Rates – G.P.

If you have a money question you’d like answered, send it to me at and write Globe Question in the subject line. I can’t guarantee a personal response but I’ll answer as many questions as possible in this space.

Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters. For more information and details on how to subscribe, go to

Editor’s note: Clarifies that exchange rates throughout the year should be used when calculating capital gains.

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