Even if it's debatable by demographers, the number seems almost incomprehensible: 7 billion people now inhabit the earth, creating opportunity for innovation and economic growth while causing concern about the sustainability of finite resources. The population has more than doubled from 3 billion in 1960, and the United Nations anticipates that it will surpass 9 billion by 2050.
The effects of the steep population growth depend on many factors, including where it is concentrated. Most of the growth is predicted to occur in Asia, Africa and Latin America. The industrialized U.S. and Europe are expected to remain stable or begin decreasing slightly. This imbalance is important when it comes to resources since the wealthier countries consume so much more than poorer countries. Roger Martin, chair of Population Matters, recently wrote an article in The Guardian in which he compared the population and consumption of Kenya to that of the U.S. While the U.S. has 300 million people to Kenya's 30 million, it takes 32 Kenyans to consume as much as one American.
It's natural to expect wealthier countries to consume more, but it's important to remember these same countries will lead the world in developing and providing solutions to the population explosion, creating opportunities for investing in business and in the market.
Here’s a brief look at how the growth in population might affect two of the biggest issues economists have identified with regard to your financial life – investing and consumer prices – and why a portfolio mix of growth and safety will serve you well :
Investing: We're already seeing what a global economy means for the U.S. stock market -- most recently with the volatility resulting from debt concerns in Europe. As the world economy evolves and expands, volatility will probably increase but could be mitigated if more small investors find the confidence to get back in the market. The stock market seeks opportunities and, as a leading economic indicator, will likely present prospects for growth in companies developing energy sources, infrastructure, technology and health care, as well as in country-specific emerging markets.
Consumer prices: Supply and demand will certainly govern prices on finite commodities like oil, which contribute to the prices we pay for transported goods, but world politics will play a role as well. The best way for consumers to counter rising prices is to move toward a balanced portfolio that allows for short-term purchases as well as long-term growth so that they won't be forced to rely on debt for everyday acquisitions.
Americans are already beginning to think about renewable energy sources and -- as a result of the recession -- have been putting more effort into shopping wisely, reducing debt and increasing their savings rate. Since part of the population growth comes from people living longer, we're also looking at long-term health care solutions. All these moves are bound to pay off in the future.
What's your opinion on how population growth will affect your financial future?
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