Are Demographics and Investment Returns Linked?

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Looking for a place to invest? Demographics may give you some insight on where best to invest your money!

Below replacement fertility levels and longer life expectancy has resulted in aging populations in both the developed and developing world. Globally, the proportion of the population over 65 is expected to represent over 20 percent of the world’s population by 2050 (up from 8 percent in 2016).  Population aging is widespread.  For instance, the Population Reference Bureau estimates that some 24 percent of Asia’s population will be sixty years or older by 2050. Population aging is further advanced in much of the developed world, with Japan, along with several European countries, having some of the largest shares of older populations. In Japan, for example, 27 percent of the country’s population is 65 or older. The United States, Canada, Australia, and New Zealand are not far behind, as their baby boomers age into retirement and fertility remains low.

So what does aging have to do with where to invest? The Canadian demographer David Foot, who wrote “Baby Boom, Bust and Echo: How to Profit from the Demographic Shift in the 21st Century”, pointed out the impact that the baby boomers had on the market, and in particular on real estate opportunities and pricing.  Likewise, our aging populations will influence the market, including the demand for long-term care facilities and retirement residences, two real-estate oriented investment opportunities that are directly related to the aging population. Certainly in the Canadian context, retirement residences have seen a sharp increase in their stock performance (Berman 2017).  Likewise, end-of-life care and funeral services will see growth opportunities. Additionally, pharmaceuticals, health care, travel and tourism, and technology will also see opportunities for investment related to aging populations, although investment opportunities in these sectors are not as direct.  Consequently, demographics will shape investment returns in the coming years.

Further Reading:

David Berman. 2017. Aging population matches maturing opportunities. The Globe and Mail, 25 January 2017, p. B1.

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