A recent study that examined young students from several participating countries have been recently published and it exposed some shocking truth about the state of financial literacy today.
One concerning data revealed that 25% of the participants did not even have the comprehension nor the right skills to make the simplest financial decisions.
In definition, financial literacy is an individual’s ability to utilize the skills and knowledge that they have learned to make educated and informed economic decisions related to investing, savings, and even the most basic financial concepts.
While a majority of the participants did not pass the criteria, these countries were able to deliver impressive results and topped the ranks for having the most literate teenagers in the world.
While the survey focused on a population of 48,000 15-year old students and examined their skills in reading, math and science, the assessment also measured the subjects’ ability to make sound financial decisions.
Canada ranked third among the 30 countries that participated in the same study. The report was released by the Organization for Economic Co-operation Developed (OECD) and the International Network on Financial Education (INFE).
2015 was a rollercoaster ride for investors. But what awaits us in 2016? Calmer seas or even more raging storms?
As the year comes to an end, it’s but prudent and wise for any investor to take stock of his portfolio.
Fund managers may have different motives compared to the individual investor. Apart from rebalancing their portfolios to properly position and adopt to current market conditions, fund managers are also concerned about how fund investors are going to review their performance. Hence, we see a bit of window dressing at year-end to make fund portfolios look prettier than they really are. The fund manager would sell his lackluster investments and acquire some really brilliant ones right near the close of the year. That way, when the fund investors look at their fund’s stock position report, the snapshot will show a portfolio with holdings in the best performing stocks. “What a great fund manager we have! He picked all the winners!”
Individually however, an investor can afford to be more realistic and practical in rebalancing his personal portfolio. He doesn’t necessarily have to sell all his losers if he has the conviction that a stock that looks awful as of year-end is going to be a real winner soon.
The key to making intelligent decisions and properly positioning your investments, like people at LOM do, is by having a relatively realistic outlook for the coming year. What trends in 2015 will have a significant effect on investments in 2016? Which sectors are the big money going to flow into? Which sectors are in trouble? What trends are expected to reverse? What are the threats being faced – economic, financial and geopolitical?
By considering the answers to such questions, an investor can have a realistic outlook for 2016 and onward. He will be making better informed decisions with his investments.
This article lays out an investment outlook for 2016 to help you plan your investment moves.
Economic outlook by geographic location. Big funds are looking at better growth prospects in Europe and Japan. Asia similarly has the best growth potential among emerging markets, whereas the UK as well as the BRICS are still expected to decline in their economies. Meanwhile, the US, is seen to remain a big threat to the stability of the global economy, particularly with its shaky bond market. Canada also faces further economic weakening as oil prices are forecast to continue in their decline.
Outlook by industry. Big money is looking more favorably towards the banking and consumer goods sector. Meanwhile they are bearish on oil, commodities/natural resource, as well as on emerging markets as a group.
Threats to the economy.
Refugee crisis in Europe. This issue currently impacts Germany the most. Not only does the crisis put a strain on the financial and economic resources of the country, it also has caused a lot of dissatisfaction with the country’s leadership and its immigration policies. Recently, Europe already temporarily suspended its Schengen open borders to address security concerns. The common euro currency comes hand in hand with open borders – as border policy affects the ease of trade between EU members. Should the refugee crisis continue, investors must be on the lookout for how Europe responds in terms of its foreign, immigration, trade and financial / economic policies.
Bond market crisis. Just as 2015 was about to end, the US junk bond market has begun to unravel. This goes in tandem with the continuing decline in oil prices. The oil and energy sector has been a primary borrower and source of junk bonds. As these highly indebted oil and energy companies post losses and default on their obligations, we can see more funds heavily invested in junk bonds start getting into trouble.
Sovereign debt crisis. The US and EU have been on a quantitative easing binge over the past few years to stimulate their economies. However, government deficits and national debts have also significantly grown. How these countries handle or fail to handle their liabilities, as the debt reaches critical levels, will play a major impact in 2016.
Analysts always have their forecasts and predictions of GDP growth, interest rates, foreign currency strength or weakness, so on and so forth. The caveat is a lot of them also get it wrong. This is why an investor must be constantly monitoring his investments to watch out for any deviations from the expected. Never try to buck the trend. Go with the flow of big money. At the same time, an investor also needs to be cautions of simply accepting consensus opinions. Contrarian investing can profit sometimes because the “talking heads”still get it wrong. Most of the time, they fail to foresee crisis situations. Hence it is critical to be alert to trends and to be hedged for any unforeseen turns in the market this coming year.