According to the U.S. government, the country only grew 1% in Q4 of 2015. But that’s still better than Canada. Our GDP up here only increased 0.8%. It doesn’t feel like the economy in either country is going to pick up any time soon. Personally I don’t mind slowing down or even contraction. Slow economic times is a natural part of the market cycle because it helps with the price discovery mechanism and prevents bubbles from becoming too big. But of course politicians want to encourage more growth all the time which means investors have to be smarter and more cautious about where to deploy capital.
One concern that affects everyone in the world is an aging global population. Japan is leading the charge on this one. Many Japanese couples grow fruit trees and live to a ripe old age. According to the World Bank, Japan has the oldest demographic with 26% of its population being age 65 or older. We all know what happened in Japan for the last 20 years. It’s GDP is basically unchanged from 1995 to 2015. Same goes for Japan’s stock market. Any money thrown into the Nikkei 225 index 20 years ago would have produced virtually no gains as of now. The couch potato method of index investing doesn’t always work for everyone.
The percentage of Canadians who are 65 or older is about 17% today. In the U.S. it’s about 15% of the population. We are still a long way off from Japan’s 26%, but it’s worth noting that 17% of Japan’s population was 65 years or older in the late 1990s.
I would continue to invest in large, profitable companies. But high quality stocks have been bid up so much that there isn’t much room for them to go higher in the short term based on fundamentals. This is why I look at alternative places to invest as well.
So earlier this month I added $7K to my Antrim Mortgage investment, bringing my total account balance for this one investment to $17,913. I had to dip into my Line of Credit to help come up with that cash. Canada’s population may be aging, but everyone needs a home so I expect this mortgage fund to continue delivering 6%+ annual returns to unit holders. I think mortgage investments are a good balance between risk and reward until better opportunities present themselves. Unlike buying a traditional REIT, if the housing market falls by 30% my mortgage fund wouldn’t lose any value. The borrower whom I indirectly lent money to still has to pay me back in full or else they risk foreclosure on their property. 🙂
As fewer working people are supporting more retired people I may have to branch out more in unconventional investments such as riskier fixed income and private equity options to hit a decent return with my investments. 🙂
Random Useless Fact:
If you were to take a regular sheet of paper that’s 0.1 mm thick and fold it in half 42 times, it would reach the moon.