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Should Demographics Drive Your Investment Strategy?

19 July 2010 2 Comments

Demographics is an interesting issue in the world of investing.  It’s definitely a factor, but it’s such a long-term factor that most people ignore it.  Think about it, we’re focused on quarter to quarter results, not long-term factors.  Yet, oddly enough, we’re told time and time again that investing is all about a long-term focus!  Well, which one is it?

I think it is about long-term, at least part of your portfolio, and therefore, demographics is very important.  While it’s maybe not the most important factor, it’s one of them.  Consider the baby boomers here in America.  Is it a coincidence that the market experienced a massive bull run during the corresponding time of the baby boomers going into peak earning years (and therefore, peak consuming years)?

If we’re looking at demographics, the long-term picture of economies in America, Europe and elsewhere might be less than ideal.  In America, the baby boomers are going into retirement mode which means less consumption.  In Europe the situation is worse.  In Japan, even worse yet.  In Russia, the birth rate is so low that the population will essentially be cut in half each generation.  Wait, I thought over-population was the world’s biggest problem!

The fact is that the some of the major, established economies of the world have some big demographic challenges. As these economies now depend largely on a quasi-socialist system with massive government subsidies and welfare, the question will shift to who will work and provide enough productivity and taxes to fund the social state? Unless major changes occur, we could easily see the collapse of the social state in Western Europe and Japan – and we might already be seeing the start of such a collapse.

For a fascinating look at demographics around the world, read America Alone by Mark Steyn. Great book.

Now, on the other side, there are economies that have demographics working for them versus against them.  Consider Vietnam.  Vietnam has the demographics that America had long ago with way more young and working people than those who are 65+ and up.  While Vietnam is definitely an emerging market with risks, demographics should be a long-term advantage for investing in the country.  The Market Vectors Vietnam ETF (VNM) might be a vehicle worth considering.  This is a major long-term play so be patient and buy after major dips.

2 Comments »

  • Theresa Morris said:

    I believe this is spot on! good article. I was researching this same information at this time for an article on my own websites, American News Magazine and Theresa Morris.com. I have a general portfolio that leans more to long term. However, the world is a great place and is becoming harder to get more bang for the buck.

    Sharing the information demographically speaking to the world and the work place may be the best way to go to assist everyone in the future.

    We are all the same sentient intelligent being species and will have to globalize into a universal taxation code. The Universal Post Office will be a large part around the world as will the world banks.

    The leaders on each continent seem to understand that their continent must produce enough of the basics of food, clothing, shelter, and entice the people to desire the communication devices, transportation, and entertainment while upgrading the infrastructure such as road systems and common public facilities to create room for the future.

    We are about to change in a large way and we can rely on Dec. 21, 2012 around the world to welcome the future of technology for all and everyone around the globe. I am all for assisting Americans, and hope we can make the world a better place by offering our country as a model for others to follow.

    Americans will still buy and have purchasing power after the retirement Baby Boomers of whom I am a part now at 58 years old. We just will not have as much to contribute. Our children seem to be struggling to figure out how to survive in an economy that needs to be upgraded.

    The jobs should be in where we need the most upgrades on earth regarding raising conscious awareness of the needs to support everyone.

    We will be sharing our future in space. Data Mining and Land Mining is a large part of investing in our future for those in space.

    Laws of successful investing will depend on all of us. We need to make sure we keep the money flowing in all our towns and communities around the world. I spend my money close to home. This is one thing that will be obvious as we begin to embrace the other realities on the Internet around the world.

    Teach the children how to maintain their energy and divide the jobs between inside and out based on climate control on the planet.

    There will be a large need to create stewards in the “SAVE THE PLANET” as those who realize the “Climate Changes” matter. The Green housing and construction and industrialization of our entire world is in progress.

    We like our creature comforts and we like being entertained. I have stock in ATT, PEPSI, DISNEY, just to name a few as an example. TJ