In other words, immigration has only a minimal impact, if any, on slowing down the decrease in working-age population by 2050.
Put another way, there are presently 4.81 workers supporting every retiree over 65 in the United States. By 2050, this figure will shrink to 2.81 workers when you include immigration, and only 2.31 workers without. Remember, Japan’s figure is 2.8 today and has dropped since the 1990s.
Many investors gloss over this relationship — if they are aware of it at all. That’s a huge mistake.
By hitching their wagons and their money to populations where the productive population is in decline, investors are dooming themselves to a massive value trap. Sure they can capture periodic market bursts based on stimulus or some other influence, but over time they’ll be fighting powerful, self-defeating headwinds because the falling number of people in their productive years ultimately translates into earnings declines and changing purchasing patterns. The opportunity costs are simply daunting.
On the other hand, hitching your wagon to countries with growing productive-age populations, you can capture the “window of opportunity” while it is opening.
That speaks to concentrating your assets and your investments on those choices backed by windows of opportunity still opening –like China‘s and Brazil’s, which do not close until 2025 and 2030 respectively. And India’s, which doesn’t even open until 2015.
Obviously, all three of the markets I’ve just mentioned face their own challenges, so let’s be clear: I am not saying you have to invest in them directly. Chinese shares are obviously prone to accounting “irregularities.” Markets in India suffer from fragmentation. Brazil is struggling with inflation.
But I am saying invest because of them. That means making deliberate decisions to concentrate your assets and your investments in companies that will capitalize on places where the windows of opportunity remain open.
In some cases, that also means investing in those choices where the windows haven’t yet opened but are expected to as suggested by population growth.
There’s a big and profitable difference for investors who understand the contrast between the two.