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Digging deep to stay on top

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Demographic trends are an important factor in investing. Investors need to dig deep into the research to discover and understand how these trends will impact individual firms, industry sectors, markets and economies.

As the U.S. population continues to grow — the U.S. Census Bureau projects an increase from 319 million to 417 million by 2060 — and people live longer, the demand for certain products and services will grow or diminish. Providing housing for the growing population, for example, will translate into greater demand for building materials. More people also means more consumption of food and resources as well. The bottom line: pricing of energy and commodities will be affected.

With the population beginning to age, people are staying in the workforce longer, but as the younger generations begin to take over the workforce, more employees are opting to work from home. Eventually, this could lead to a diminished demand for office space and a demand for new and improved technologies to facilitate teleworking.

The improvements in technology over the past few years, for example, have made it easier for companies to hire all over the world without having to worry about having office space for them. This has promoted offshoring and corporate savings in labor costs, brought more people into the workforce, and spurred growth of the middle class in emerging markets. As more people begin to make more money, it leads to more consumption. People begin to buy things such as houses and cars. Competitive companies and countries that produce in-demand goods will prosper.

Keeping an eye on demographic changes and trends can allow investors to stay ahead of the game and identify and profit from developing opportunities. There are no “sure things” in the investment world, but there is no doubt that shifts in demographic, economic and social trends will determine the market winners and losers in the coming decades.

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