RetireJapan

I would like to hear your thoughts on how we, as investors, can invest wisely and still get good returns on our investments in an age of population decline.

My investment thesis is that companies worldwide will develop new products and services and the world economy will grow over time. By owning world stock funds I can share in this.

I gave up trying to be clever years ago

https://www.retirejapan.com/blog/my-inv ... all-wrong/

gulfshores2023 wrote: ↑Tue Aug 22, 2023 6:08 pm I would like to hear your thoughts on how we, as investors, can invest wisely and still get good returns on our investments in an age of population decline.

The fact that we are in Japan, should not have a substantial effect on the types of things we invest in. Choose broad-based global index funds.

In fact, I know many who are biased against Japan and chose the Kokusai funds (Developed world ex Japan) as they feel their pensions exposes them enough to the Japanese stock market. (The pension fund is invested in 25% Global stocks, 25% Japanese stocks, 25% Japanese bonds, 25% global bonds).

In short, you are more likely to pick an underperformer. Do not even try. Buy the lot.

I agree that there may be a way for companies to continue being profitable, regardless of pop decline. Efficiencies may increase, markets once closed might open up, etc. And ... there is always the possibility that things will change, and pop will start to rise again. It seems unlikely now, but one never knows.

Also, I like the idea of Index funds, ETF's, and keeping it simple.

I looked but couldn't find a Bain report that was posted here maybe three years ago. Its whole focus was china, and how its own population bubble would affect it, I think it was from ~2030 or so. A big decline in manufacturing workers is already baked into its population (lots more babies now--which is not happening--is effectively too late). Besides the other usual stuff like the (coming im-)balance between working age population and retirees. And compared to japan (=developed), china is still in a much earlier stage of development (medical services, infrastructure for the elderly, etc.). And if news reports are to be believed, diabetes is comparatively common there.

While japan's replacement rate is low, at about 1.3, look at china: https://www.reuters.com/world/china/chi ... 023-08-15/ (Taiwan and Korea are also lower than Japan.)

I think OP was referring to global population decline, ie most developed countries already below replacement with developing countries' birthrates dropping quickly too.

gulfshores2023 wrote: ↑Wed Aug 23, 2023 5:01 am Also, I like the idea of Index funds, ETF's, and keeping it simple.

Be careful with index funds, ETFs, mutual funds, etc. You mentioned in your PR thread that you're American so you should be aware of the punitive treatment of PFICs in the US tax code. If you want to invest in those then you should do it from a US based brokerage account instead of a Japanese brokerage account.

Is economic growth predicated on population growth? I don't think that is necessarily true. Imagine the amount of economic growth if the poorer nations of the world could catch up to the West. If you are looking for things to worry about in global investing, climate change is likely the most concerning as it will cause disruptions in supply chains, food production and could cause massive property damage from flooding and droughts. Not to mention the wars and strife this will cause amongst and within different countries as people fight over scarce resources.

That said, we have no choice but to invest - if the global economy tanks we are all in the same boat together.