Pape’s Q&A: The next wave, ETF managers, TFSA transfers

Pape’s Q&A: The next wave, ETF managers, TFSA transfers

Gordon Pape answers readers’ investment questions


It’s been a while since I’ve checked the Q&A inbox, so let’s see what issues people are concerned about.

Next wave

Q – Many foresee another “wave” in this pandemic with the fear of even more serious variants developing. What is that going to do this time to regular blue-chip stocks? – Jennifer W.

A – Stocks (blue-chip and others) have done very well throughout the pandemic, after the market plunged in March 2020 when the seriousness of the coronavirus became apparent. It turned out to be the shortest bear market in history as all North American indexes rallied back to record highs.

There are four major reasons why this happened.

First, central banks slashed interest rates to near zero and reintroduced quantitative easing programs to stimulate the economy.

Second, massive government spending programs provided support for laid-off employees, small businesses, renters, and others affected by the pandemic.

Third, stock markets always look to the future, not the past. Markets rose in anticipation of a recovery that would produce higher corporate profits, which has happened.

Finally, low interest rates have reduced real yields on bonds (after accounting for inflation and taxes) to negative territory, leaving stocks as the only profitable option.

We now have a new variant to worry about, omicron. Even if it’s as bad as previous waves, which is doubtful, because more people are now vaccinated, I doubt we will see the kind of reaction as we did in March 2020. The safety mechanisms I mentioned are still in place.

However, given the strong run the markets have enjoyed, we are likely to experience a slowdown going forward. The markets pulled back on news of the new variant, but stock prices are still high and the components aren’t in place to sustain the recent momentum we’ve enjoyed.

The bottom line is the growth pattern of your blue-chip stocks is likely to slow, no matter what happens. That said, I’d continue to hold them for the long term.

ETF managers

Q – With so many different types of ETFs in existence today, what is the difference between someone who constructs an ETF and a portfolio manager for a mutual fund? Except for the cost, there doesn’t seem much difference between mutual funds and most ETFs. It’s difficult to find out information about the people who construct an ETF, but easy to research performance of different mutual fund managers. – Paul R.

A – Most ETFs are passive, meaning they track the performance of a specific index. These can range from large indexes like the S&P 500 Composite to small, sector-specific indexes. Because of this, no one picks individual stocks, and no extensive research is needed, which reduces costs significantly. There are a few ETFs that are actively managed, and you’ll find they charge higher fees.

By contrast, most mutual funds use active management, either by a team or an individual, with all the costs that entails for screening stocks. Someone must pick up the tab for all that work – and that someone is the individual investor.

Transferring RRIF assets

Q – I would like to get you opinion on an idea that I have. I have just changed my RRSP into a RRIF. At this point, my husband and I don’t need the extra money that I can access in this account.

What I would like to do, instead, is transfer stock shares out of the RRIF account and put them in my TFSA. I would like to do this instead of putting in the allowed yearly $6,000.

I realize that I would only be allowed the equivalent of $6,000 with my transferred shares.

Is this a doable idea? Are there any rules or regulations that would prohibit this action? – Kathie S.

A – Sorry this idea won’t fly. You can’t transfer assets from a RRIF or an RRSP directly into a TFSA. If you could, everyone would do it because RRSP/RRIF withdrawals are taxable whereas those from a TFSA are not.

The only way to do this is to make an in-kind transfer of the shares to a non-registered brokerage account and be assessed tax on the value withdrawn from the RRIF. Then you could transfer the shares into a TFSA.

The bottom line is that any RRSP/RRIF withdrawals in any form are taxable.

If you have a money question you’d like answered, send it to and write Fund Library Question on the subject line. I can’t guarantee a personal answer, but I’ll deal with as many as possible in this space.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.

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Notes and Disclaimer

© 2021 by The Fund Library. All rights reserved. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.