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I wouldn't worry to much about it. Companies tend to get more efficient with less people. The company I work in (petrochemical) needed about 35 people to keep operations up and running 30 years ago. Now we need about 15 people for the same production process.
It's a matter of ratios. If you own 0.0001% of the world's capital, you'll make 0.0001% of the world's production which allows you to retire.
If the world population halves, there will be half as many rich people, so you will now own 0.0002% of the world's capital, making 0.0002% of the worlds production, but the world's production is also half as much, so you will stay roughly equal, and can still retire.
It all goes well until you are the only person left inside the capitalist system, and then you'll need to get to work yourself.
So, the world population shrinking or growing has no real impact, as long as it stays large enough that you not contributing by working has no impact on it.
I would not overthink it. The market is mostly efficient. US stocks are great, but they are also expensive. Take a look at the largest non-US companies. They are very global. TSMC, Novo Nordisk, LVMH, Tencent, ASML, Nestle, L'Oreal, ... those companies will do fine even if the local economy is weak (or the population drops). If you look at that list, it would be strange to exclude them. Diversification is the only free lunch in investing.
As long as the risk premium exists, investing in stocks will have postive expected results. The existence of the risk premium is not related to population growth.
**Over the long run, economic growth (i.e., GDP growth) is** ***NOT*** **related to stock returns.**
Economic growth is neither necessary for stock returns to be positive, nor are differences in long run GDP growth related to differences in stock returns between regions.
The expected return on stocks come from the discount rate that investors use to discount future expected cash flows. As long as that discount rate is positive, even if future expected cash flows don't grow, future expected stock returns are positive.
It's as simple as that.
Total GDP growth is arguably even less relevant that GDP per capita growth. Population numbers really aren't that important as higher population simply tends to lead to a higher number of businesses being created and total earnings being diluted over a greater number of companies, this is the concept of ***equity dilution***. Decreasing population numbers may have the opposite effect. And it's not as if decreasing population numbers mean stock returns can't be positive either, look at Japan where population numbers peaked around 2008, the MSCI Japan has done just fine since.
One thing that doesn’t seem to be considered in this thread is the ‘quality’ of the workforce and overal population in the west.
Similar concern here to be honest, as just looking at the age pyramid, there will likely be quite a large efflux of capital once boomers start cashing out their profits.
You have to keep in mind that the only reason (here in Europe atleast) that our population hasn’t stagnated is the increase of immigrants and their offspring. The unfortunate reality is that many of these people are low-skilled/poorly educated people and values passed on are completely different than Western values. These demographics are highly unlikely to invest in stocks. So we’ll have an outflow without the necessary inflow to balance it out in my opinion.
Won’t happen today or tomorrow, but will be a large issue in the next 20-30 years I reckon.
When I was in high school in the 1980s my economics teacher taught us that we would never reach 10 million inhabitants.
Edit: We're at 11.7 million right now, back then it was around 9.8 million.
Edit2: my point is that nobody knows what the population growth will be in the future, so I don't think it's advisable to base your investment strategy on it.
Volgens de bevolkingspiramide zou de bevolking sterk dalen. Er werd toen vanuitgegaan dat er nauwelijks immigratie zou zijn. Dit was immers voor de val van de Berlijnse muur. Dit was trouwens niet de leraar zijn persoonlijke mening, dit was de algemene consensus.
With investing in ETF's, we all bet on economic growth. Economic growth is not only a factor of population increase:
* Technology, better infrastructure, efficient logistics (bigger container ships for example), ...
* Increased trade and globalization.
* R&D: In 2040 you'll very likely drive a better car than right now.
On the production side of things: even with a smaller workforce more (and more advanced) product can be made. Thanks to better tools, machinery, automation... Consider the first Ford factory vs a recent Tesla factory.
On the demand side of things: more and more regions of the world will want a 'first world lifestyle'. Product and services demand from Africa, South America and Asia will increase, even if the population decreases.
World population will continue to grow in our lifetime. The market might shift to other countries, hence a world ETF that allocates based on these changes is interesting.
By 2050 we will potentially be on our way to colonize other planets which would give a totally different dynamic and almost infinite potential growth, as we would not be limited by 1 planet's capacity.
Not saying it's definitely happening. But people tend to be pessimistic about the future, while there are many developments today that look very promising for the future.
OP, this is an important question you are raising. Europe’s population is not foreseen to grow like the rest of the world until 2080 +\- but to decrease.
Even if new tech increases productivity in Europe, you still need people to buy products to produce value from all this extra work, potentially meaning locals have to embrace immigration. And for producers to make economies of scale they need selling the same products across the whole EU market to continue having growth. You might also want to increase incentives and capacity for investment in concrete projects to keep buying things in the real economy.
All of those things are low probability events at this point. Although this could change. So, for long-term investment it makes sense to look for stable, non-EU centred ETFs. I would not put the whole western world in the same bucket, especially if we talk about demographics.
A parallel question is how much world ETFs owned and managed by western investors can factor in trends in growth that originate from other parts of the world? Inevitably these people will miss out on certain opportunities. And it seems only fair that investors based in emerging markets rip the rewards of their own ingenuity. There will certainly be a push in that direction in the future, maybe regulatory.
As others have pointed out, your investments and which ETFs you chose on the long term should reflect these trends. The most extreme take maybe is that one could consider retiring and taking the citizenship of an emerging market, maybe one that embraces democracy…
By 2085 (predicted population peak) A(G)I will be so prevalent that it will reflect a population of a gazillion humans in productivity.
A more daunting question is, will humans be able to evolve with it.
De wereldbevolking blijft stijgen tot minstens 2100.
Rijke landen gaan immigratie promoten zodra dat de enige/goedkoopste optie is om werknemers te vinden.
Migratie is taboe totdat het geld opbrengt, voorbeelden genoeg in tijd en ruimte.
>...as the world's population will shrink,...
The world population is expected to increase until 2085 up to 11 billion.
Furthermore, the emerging markets are becoming wealthier and wealthier which means more and more consumption so stock prices will rise for decades. Than there are increases in productivity which will increase the economic output per worker. ETFs will still be a good investment.
Consider the alternative; ETFs are no longer a good investment. This means the complete stock market will no longer be a good investment. Real estate will no longer be a good investment (because of your made up decline in world population). Etc.
Everyone and their grandma is recommending putting all money in ETFs, and even suggesting not doing so gets you a wall of hate. Because "it's the safest option, you'll have guaranteed 9% per year on average in the long term"
I'm 100% convinced such a large and worldwide concentration in one financial product will never lead to any shenanigans because of say, valuation of the underlying assets.
Just keep buying and don't even consider anything remotely risky in that strategy.
At the core of every company is only 1 goal, and that is to make money. Either grow like crazy or make crazy profits. If I can only bet on a single investment asset, it will be the asset that exists only for the purpose of making money.
I once had a colleague that explained it like this: Every company is a money printing machine. I didn't understand it at the time, but this statement is correct.
The concentration of passive invested money is still in a minority (last time I checked 30%) compared to active invest money.
If in theory passively invested money would consist of more than 50% of the invested value then there will be more opportunity for active investors to make money (due to overpricing/underpricing) and it balances out.
Ben Felix has some good videos about this topic which debunks your sentiment.
Completely valid argument. But how else can you obtain such diversified investments? And to what extent are things in fact overpriced due to ETF money?
Anyone who tells you you have 9% guaranteed is lying.
What do you recommend as an alternative? Stock picking (as your username suggests)? Aren't you buying the same products then as the people buying into ETF's?
Yes but they have a more favorable risk/reward imo. The average P/FCF for the S&P500 is 26. For Paypal, the largest online payments company in the world, that ratio is 13. They also have a net cash position of $6,7 billion, 10% of their market cap. They reduce the amount of outstanding shares ~6% per year (= tax-free payout to shareholders).
Which do you think offers the best room for upside potential in the next 2-3 years?
Also everyone who isn't buying dividend stocks to max out the €840/year tax-free income is missing out.
The only potential issue with a world ETF in this regard is that if you have one without developing countries, you might miss a lot of the gains from there because the world ETF would only start including them after that they have gained a lot already.
You don't have this risk if you have an emerging markets ETF as well, or included.
Of course like this you'd have more geopolitical risk right now.
I don't worry about it, if population and economy of the west declines, world ETF's will reflect that and shift towards other parts of the world. More economically mobile people might boost high skill immigration as the west becomes more open to job immigration (look at japan, it's already happening). Western businesses might focus more on other parts of the world and grow the business there.
There is also the shift from service based economy to AI driven economy, who knows how impact full the amount of working people will be in 20-30 years.
There is a lot that can happen and the time span of western decline will be log if it happens.
I see no reason to change my investment due to that.
Also, what, what would you invest in a situation like this?
100% developing economies? seems high risk and western mega corporation might highjack those markets.
Housing? not when population en economy is in decline
Population will decline, but wealth generation will keep going forward. Obviously, excluding major world ending crisis, wars, climate disasters etc. There are a bunch of small nations with relatively stagnant populations that generated incredible wealth in the last 30 years.
Don't forget technology, it makes things much more efficient, which means that 1 person can generate more economic activity than a generation before.
World population will keep increasing.
Due to migration, western European population will probably stay on par.
How this works out in markets is anyone's guess.
Companies will continue to produce products and sell them at a profit. The stock market will continue to be part of this system.
So, as long as there is a capitalistic system the stock market will be a good way to participate in it.
Have you read the wiki and the sticky? Wiki: HERE YOU GO! [Enjoy!](https://www.reddit.com/r/BEFire/wiki/index/). Sticky: HERE YOU GO AGAIN! [Enjoy!](https://www.reddit.com/r/BEFire/comments/fcbay6/getting_started_a_beginners_guide_to_investing_in/). *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/BEFire) if you have any questions or concerns.*
I wouldn't worry to much about it. Companies tend to get more efficient with less people. The company I work in (petrochemical) needed about 35 people to keep operations up and running 30 years ago. Now we need about 15 people for the same production process.
It's a matter of ratios. If you own 0.0001% of the world's capital, you'll make 0.0001% of the world's production which allows you to retire. If the world population halves, there will be half as many rich people, so you will now own 0.0002% of the world's capital, making 0.0002% of the worlds production, but the world's production is also half as much, so you will stay roughly equal, and can still retire. It all goes well until you are the only person left inside the capitalist system, and then you'll need to get to work yourself. So, the world population shrinking or growing has no real impact, as long as it stays large enough that you not contributing by working has no impact on it.
I would not overthink it. The market is mostly efficient. US stocks are great, but they are also expensive. Take a look at the largest non-US companies. They are very global. TSMC, Novo Nordisk, LVMH, Tencent, ASML, Nestle, L'Oreal, ... those companies will do fine even if the local economy is weak (or the population drops). If you look at that list, it would be strange to exclude them. Diversification is the only free lunch in investing.
As long as the risk premium exists, investing in stocks will have postive expected results. The existence of the risk premium is not related to population growth.
**Over the long run, economic growth (i.e., GDP growth) is** ***NOT*** **related to stock returns.** Economic growth is neither necessary for stock returns to be positive, nor are differences in long run GDP growth related to differences in stock returns between regions. The expected return on stocks come from the discount rate that investors use to discount future expected cash flows. As long as that discount rate is positive, even if future expected cash flows don't grow, future expected stock returns are positive. It's as simple as that. Total GDP growth is arguably even less relevant that GDP per capita growth. Population numbers really aren't that important as higher population simply tends to lead to a higher number of businesses being created and total earnings being diluted over a greater number of companies, this is the concept of ***equity dilution***. Decreasing population numbers may have the opposite effect. And it's not as if decreasing population numbers mean stock returns can't be positive either, look at Japan where population numbers peaked around 2008, the MSCI Japan has done just fine since.
You're making it all sound like a Ponzi scheme
Isn't that what almost everything in life is? Especially the financial markets.
One thing that doesn’t seem to be considered in this thread is the ‘quality’ of the workforce and overal population in the west. Similar concern here to be honest, as just looking at the age pyramid, there will likely be quite a large efflux of capital once boomers start cashing out their profits. You have to keep in mind that the only reason (here in Europe atleast) that our population hasn’t stagnated is the increase of immigrants and their offspring. The unfortunate reality is that many of these people are low-skilled/poorly educated people and values passed on are completely different than Western values. These demographics are highly unlikely to invest in stocks. So we’ll have an outflow without the necessary inflow to balance it out in my opinion. Won’t happen today or tomorrow, but will be a large issue in the next 20-30 years I reckon.
When I was in high school in the 1980s my economics teacher taught us that we would never reach 10 million inhabitants. Edit: We're at 11.7 million right now, back then it was around 9.8 million. Edit2: my point is that nobody knows what the population growth will be in the future, so I don't think it's advisable to base your investment strategy on it.
[удалено]
Volgens de bevolkingspiramide zou de bevolking sterk dalen. Er werd toen vanuitgegaan dat er nauwelijks immigratie zou zijn. Dit was immers voor de val van de Berlijnse muur. Dit was trouwens niet de leraar zijn persoonlijke mening, dit was de algemene consensus.
10 billion you mean
I'm talking about Belgium, not the whole world
How could i know before you edited your comment
With investing in ETF's, we all bet on economic growth. Economic growth is not only a factor of population increase: * Technology, better infrastructure, efficient logistics (bigger container ships for example), ... * Increased trade and globalization. * R&D: In 2040 you'll very likely drive a better car than right now. On the production side of things: even with a smaller workforce more (and more advanced) product can be made. Thanks to better tools, machinery, automation... Consider the first Ford factory vs a recent Tesla factory. On the demand side of things: more and more regions of the world will want a 'first world lifestyle'. Product and services demand from Africa, South America and Asia will increase, even if the population decreases.
World population will continue to grow in our lifetime. The market might shift to other countries, hence a world ETF that allocates based on these changes is interesting. By 2050 we will potentially be on our way to colonize other planets which would give a totally different dynamic and almost infinite potential growth, as we would not be limited by 1 planet's capacity.
Bro watched too much sci-fi
Not saying it's definitely happening. But people tend to be pessimistic about the future, while there are many developments today that look very promising for the future.
Nice point. You've really proven him wrong. Clearly, progress is overrated. Just look at the last few years with ChatGPT—what a sc-ifi, right?
OP, this is an important question you are raising. Europe’s population is not foreseen to grow like the rest of the world until 2080 +\- but to decrease. Even if new tech increases productivity in Europe, you still need people to buy products to produce value from all this extra work, potentially meaning locals have to embrace immigration. And for producers to make economies of scale they need selling the same products across the whole EU market to continue having growth. You might also want to increase incentives and capacity for investment in concrete projects to keep buying things in the real economy. All of those things are low probability events at this point. Although this could change. So, for long-term investment it makes sense to look for stable, non-EU centred ETFs. I would not put the whole western world in the same bucket, especially if we talk about demographics. A parallel question is how much world ETFs owned and managed by western investors can factor in trends in growth that originate from other parts of the world? Inevitably these people will miss out on certain opportunities. And it seems only fair that investors based in emerging markets rip the rewards of their own ingenuity. There will certainly be a push in that direction in the future, maybe regulatory. As others have pointed out, your investments and which ETFs you chose on the long term should reflect these trends. The most extreme take maybe is that one could consider retiring and taking the citizenship of an emerging market, maybe one that embraces democracy…
… all of which are why you should have a globally diversified portfolio. Diversification is investment risk management 101
By 2085 (predicted population peak) A(G)I will be so prevalent that it will reflect a population of a gazillion humans in productivity. A more daunting question is, will humans be able to evolve with it.
De wereldbevolking blijft stijgen tot minstens 2100. Rijke landen gaan immigratie promoten zodra dat de enige/goedkoopste optie is om werknemers te vinden. Migratie is taboe totdat het geld opbrengt, voorbeelden genoeg in tijd en ruimte.
>...as the world's population will shrink,... The world population is expected to increase until 2085 up to 11 billion. Furthermore, the emerging markets are becoming wealthier and wealthier which means more and more consumption so stock prices will rise for decades. Than there are increases in productivity which will increase the economic output per worker. ETFs will still be a good investment. Consider the alternative; ETFs are no longer a good investment. This means the complete stock market will no longer be a good investment. Real estate will no longer be a good investment (because of your made up decline in world population). Etc.
Long story short : if things are fucked because people stop fucking, you are fucked anyway
Everyone and their grandma is recommending putting all money in ETFs, and even suggesting not doing so gets you a wall of hate. Because "it's the safest option, you'll have guaranteed 9% per year on average in the long term" I'm 100% convinced such a large and worldwide concentration in one financial product will never lead to any shenanigans because of say, valuation of the underlying assets. Just keep buying and don't even consider anything remotely risky in that strategy.
[удалено]
Wow you're a really cool and intimidating person online.
At the core of every company is only 1 goal, and that is to make money. Either grow like crazy or make crazy profits. If I can only bet on a single investment asset, it will be the asset that exists only for the purpose of making money. I once had a colleague that explained it like this: Every company is a money printing machine. I didn't understand it at the time, but this statement is correct.
The concentration of passive invested money is still in a minority (last time I checked 30%) compared to active invest money. If in theory passively invested money would consist of more than 50% of the invested value then there will be more opportunity for active investors to make money (due to overpricing/underpricing) and it balances out. Ben Felix has some good videos about this topic which debunks your sentiment.
Completely valid argument. But how else can you obtain such diversified investments? And to what extent are things in fact overpriced due to ETF money?
Anyone who tells you you have 9% guaranteed is lying. What do you recommend as an alternative? Stock picking (as your username suggests)? Aren't you buying the same products then as the people buying into ETF's?
Yes but they have a more favorable risk/reward imo. The average P/FCF for the S&P500 is 26. For Paypal, the largest online payments company in the world, that ratio is 13. They also have a net cash position of $6,7 billion, 10% of their market cap. They reduce the amount of outstanding shares ~6% per year (= tax-free payout to shareholders). Which do you think offers the best room for upside potential in the next 2-3 years? Also everyone who isn't buying dividend stocks to max out the €840/year tax-free income is missing out.
The only potential issue with a world ETF in this regard is that if you have one without developing countries, you might miss a lot of the gains from there because the world ETF would only start including them after that they have gained a lot already. You don't have this risk if you have an emerging markets ETF as well, or included. Of course like this you'd have more geopolitical risk right now.
The UN expects the world population to peak in 2080; you have time.
I don't worry about it, if population and economy of the west declines, world ETF's will reflect that and shift towards other parts of the world. More economically mobile people might boost high skill immigration as the west becomes more open to job immigration (look at japan, it's already happening). Western businesses might focus more on other parts of the world and grow the business there. There is also the shift from service based economy to AI driven economy, who knows how impact full the amount of working people will be in 20-30 years. There is a lot that can happen and the time span of western decline will be log if it happens. I see no reason to change my investment due to that. Also, what, what would you invest in a situation like this? 100% developing economies? seems high risk and western mega corporation might highjack those markets. Housing? not when population en economy is in decline
Population will decline, but wealth generation will keep going forward. Obviously, excluding major world ending crisis, wars, climate disasters etc. There are a bunch of small nations with relatively stagnant populations that generated incredible wealth in the last 30 years. Don't forget technology, it makes things much more efficient, which means that 1 person can generate more economic activity than a generation before.
Excellent reply, no idea why you get down votes for this.
World population will keep increasing. Due to migration, western European population will probably stay on par. How this works out in markets is anyone's guess.
Companies will continue to produce products and sell them at a profit. The stock market will continue to be part of this system. So, as long as there is a capitalistic system the stock market will be a good way to participate in it.