personal economic macro

Whether you are a middle-class with a successful career or a young person in your early twenties and fledgling, facing this age where the only constant is "change", everyone must make early plans for their own future.

Do you know how stock and bond prices are affected by demographics? Want to know how house prices will go in the next 20 years? When the average life expectancy increases to 95 or 100 years old, is there enough wealth to support you to live a happy old age? How to properly plan and manage one's wealth and break the curse of "being rich for three generations"? Let's listen to Rui Meng, a professor of finance and accounting at CEIBS.

Once, during dinner with my wife, we talked about retirement. When the planned 65-year-old comes and wants to sell the house or stock to enjoy the old age, will anyone be willing to take over the house and stock? This prompted me to seriously think about the topic of demographics and asset allocation for the first time.

We generally divide assets into two categories, one is called movable property and the other is called immovable property. Chattels can be divided into three categories: the first category is equity, such as stocks or public funds. The second category is fixed income, such as bank deposits, monetary funds, and bank financing. The last category is collectively referred to as alternative investments, such as precious metals, private equity funds, options, etc.

Economics believes that the age structure of the population structure, the proportion of the middle class and the wealthy, etc. will affect our consumption habits, demand for financial products, and further affect a country's economy.

Thirty years old, sixty ears smooth How does

population structure affect the price and allocation of assets?

There is a classical theory in economics that states that the economic growth of a country depends on four elements: capital, natural resources, productivity and labor (population).

Economists have found that people generally start thinking about investment appreciation after the age of 30 and start planning for retirement after the age of 65, so people in between these two age groups are those who have net investment in financial assets.

Some data show that the age structure of a country's residents is positively related to the GDP growth rate. When a country does not have any population growth, its normal economic growth rate is 2.5%. When the proportion of the population labor force increases by 1%, the per capita growth rate is GDP would increase by 0.67%.

Demographics affect the economy and, of course, the price of assets and the demand and valuation of assets. Economists have found that stock returns are positively correlated with population size, and if the country doesn't experience any population growth, stocks should maintain an annualized return of 2.5%. For every 1% increase in the population, the return on stocks increases by 1.4%.

Usually the price-earnings ratio is used to measure the value of a stock market, and we will find that there is a positive correlation between the population structure and the price-earnings ratio.

Who will take over your property in 20 years?

In the report of the San Francisco branch of the US Federal Reserve, it can be seen that as the proportion of the main population of stock investors aged 40 to 49 increases and the demand for stocks increases, the valuation of the US stock market is rising, and vice versa. Scholars have also found that bond yields are also positively correlated with demographics.

In addition, demographics will also affect people's appetite for risk. Human nature is risk-averse, and with age, the degree of his appetite for risk decreases. A person is at the peak of his risk taking in his 30s and 40s, and he will allocate most of his assets into high-risk equity and so on, but when he slowly enters old age, his risk appetite is declining, His portfolio would rebalance from high risk to low risk. The proportion of

middle-class or wealthy people affects resource allocation Besides age, another important factor is the proportion of middle-class and wealthy people in our population structure, because these people are the main force of consumption in China. In a survey conducted by Boston Consulting Group last year, households with a monthly income of 12,000 to 24,000 yuan were defined as the middle class, and those with a monthly income of more than 24,000 yuan were called the wealthy. It is reported that last year these two groups contributed more than 50% of consumption.







As China's demographic structure continues to adjust, the proportion of the middle class continues to increase. What are the characteristics of these people? First, the education is relatively high. Second, they no longer emphasize cheap and high quality and emphasize the brand, and they have a very high loyalty to the brand. Third, they do not worship foreigners, and more and more new generations are more concerned about domestic brands.

Therefore, from the perspective of industrial development and industrial investment, we need to understand the preferences of the new main consumer forces so as to adjust the investment portfolio to cater to the consumption habits of these rising middle class and wealthy people in China. As the proportion of the tertiary industry in the total GDP increases, China will enter a service-oriented society, and some service industries such as study tours, education, medical care, health care, and entertainment have great growth potential in the future.

In addition, with the adjustment of the population structure and the improvement of the aging of the population, some emerging industries related to the elderly will also have great development prospects. For example, old-age housing, old-age insurance, medical care, education, entertainment, hygiene, etc., are all emerging industries in the future. Will China's

housing prices continue to rise in the next 20 years ? For an ordinary Chinese family, most of the wealth is invested in real estate, that is, real estate. How exactly does demographics affect returns on real estate investments? First let's look at who can afford to buy real estate. For an adult, his first home purchase is basically at the age of 30 when he started a family. Between the ages of 30 and 40, the family size may have increased, and with one or two children, the original home for the first time was not big enough, and the housing needed to be improved, so we found that at the age of 42, it appeared again. The climax of second home ownership. But at the age of 65, when the child has graduated from college and has left the home, there is no need to live in the old house. Many people will sell the original big one for a small one. So in a country, the higher the proportion of people aged 30 to 40 in its population structure, the greater the demand for real estate. Who will take over your property in 20 years? Taking the United States as an example, this graph illustrates the relationship between the proportion of the population aged 30 to 44 in the United States and the housing price index. As the proportion of the population aged 30 to 44 increases, the price of its real estate index is rising, and vice versa. in decline.











In the past ten years, it is precisely the ten years in which the proportion of China's population aged 30 to 40 has been increasing. Therefore, in the past ten years, the price of real estate in first-tier cities has increased by 10 times. There are economic reasons behind it.

At present, China's demographic dividend is slowly disappearing. There are two indicators of the demographic dividend. One is that the proportion of the workforce between the ages of 18 and 64 in the population has declined since 2010. Therefore, in the past five years, everyone will clearly feel that China's labor costs are getting more and more expensive.

The second basis to measure the disappearance of the demographic dividend is the proportion of 1-15 year olds in China. Internationally, when the proportion of the total population between the ages of 1 and 15 is between 15% and 18%, it is called a phenomenon of severe low birthrate. China has fallen from 42% in the 1970s to 16% today, and has fallen into the The United Nations considers the phenomenon of serious low birthrate.

When the demographic dividend disappears, the demand for real estate will naturally decline. What is the proportion of ordinary Chinese households owning a house? If we include the parents' houses in it, the ownership rate of houses in China is above 90%, while the average rate in the world is 50%-60%. Another indicator is to look at the per capita living area: the per capita living area in the world is 20 square meters. According to official data, the per capita living area in China reached 33 square meters last year.

Therefore, the two indicators of house ownership rate and living area indicate that in the near future, perhaps in 2020 or 2030, when our generation is going to retire and sell houses, this time will be When there is a surplus of houses, the price at that time will definitely go down. There will be a surplus of real estate in China.

Retirement at the age of 70,

what can you use to support a happy old age?

Similarly, with the disappearance of the demographic dividend and the increasingly severe aging of the population structure, we will face a cruel fact in the near future that we have to postpone the age of retirement.

Who will take over your property in 20 years?

This graph shows how the average retirement age in the United States has changed over time. The average American retirement age today may be 64, but 20 years from now, the average retirement age will be 73.

We should make a plan for our future as soon as possible, when will we retire, if our life expectancy is not the average life expectancy of 76 years in China today, if we speculate, by 2050, when our average life expectancy in China or the world will be When you reach 95 or 100 with improved genetic testing and medical care, do you have enough wealth to support yourself in a prosperous and happy old age?

If you don't manage your money, you don't care about your money.

How to break the curse of "wealth can't be more than three generations"?

Every year, the world's wealth grows at a rate of 8%. As a rising "new star" in the Asia-Pacific region with the fastest growing wealth in the world, China, whether it is a business or ordinary people, has gradually strengthened its spending power. In the past 30 years, ordinary families in China have accumulated a lot of wealth. According to a survey by Boston Consulting Group last year, in China, about 1.2 million households had disposable funds of more than 10 million yuan in 2015, and the assets of this high-net-worth group had reached 100 trillion yuan.

There is an old saying in China: "Rich is only three generations". Today, when the wealth of ordinary Chinese families is increasing day by day, how to manage these wealth and make the wealth foundation evergreen is a difficult challenge we are currently facing.

How does a family allocate wealth rationally? For the average middle-class family, wealth allocation can be divided into four types: the first type is called living money, which usually accounts for 10% of income. The second part is called life-saving money, that is, life and health insurance, accounting for 20% of income. The third part is the money used to "make money", accounting for 30%. The last category is money used to preserve value, including money for travel, children's education and future retirement, which accounts for almost 40% of wealth.

Generally speaking, a country's wealth management industry will go through the following three stages of development: the first stage is product sales, the second stage is wealth consulting, and the third stage is wealth management. Compared with other developed capital markets, China is still in its infancy in the field of wealth management, and both product providers and investors are immature.

Most of the assets of ordinary Chinese households are real estate and deposits, and the investment portfolio is not diversified enough. Secondly, most of the assets or wealth of Chinese investors are allocated domestically, but with the internationalization of the RMB and the opening of capital accounts, more and more ordinary Chinese families are aware of the importance of international asset allocation. Third, Chinese investors or wealthy people do not have enough trust in professionals. Their financial or investment decisions are usually made by themselves, and they are generally reluctant to pay for professional services. Fourth, because of the wrong concept of rigid payment, Chinese investors have insufficient awareness of risks and have high expectations for investment returns.

With the increase in the wealth of ordinary Chinese families, we need to design a wealth allocation plan for the family to resist the risks of birth, aging, illness and death that we face in our lives. This is a correct financial management concept.