• Home
  • About
  • Recommended Reading
  • Disclaimer
  • Privacy Policy
  • Advertise / Contact

Invest It Wisely

Maximizing your EV in life

  • Home
  • Growing Your Wealth
  • Small Business Solutions
  • Healthy Living
  • Miscellaneous

Betting on the Future

By Kevin

Casino games. Source: http://www.artelista.com/obra/5907308016657704-casino.htmlAre you the type of person that occasionally likes to gamble? Do you ever go to the casino and play slots or table games, hoping to score a big hit? How about poker, a game in which skill plays a big part, as well as luck. Or perhaps you like to bet on horse racing?

Going to the casino for a night out can be fun, but only a fool would willingly gamble with all their life savings. Even if you are not someone who likes to gamble at all, however, you may be unwittingly doing just that, gambling with all of your life savings, by betting on your future.

Over the last 100 years or so, the stock market has grown at a compound annual rate of 9.55%. Real economic growth hasn’t been so bad, either. Things in more recent history, however, have been a bit different.

Economic growth in the developed western world is slowing down, and the stock market has basically moved sideways over the last ten years. Bull markets and bear markets are a natural part of the markets, but there may be more reasons to be concerned about the future.

I have talked about how we can look forward to a future of prosperity and long lifespans, but we have not yet arrived at that point. In the meantime, there are real issues which could pose as obstacles along the way.

Potential pitfalls

The first main obstacle is the growing exodus of older people from the workforce, as they retire. While this exodus opens up opportunities for younger people, it also increases the real resources required to support these retirees. Some countries are even in danger of becoming “upside down”; they will eventually end up with more retirees than workers!

With conventional retirement planning, people begin drawing down on their nest eggs as they leave the work force. With time, they will eventually consume most of their capital. This selling activity will place downward pressure on asset valuations, which may have real impacts on the growth you expect to achieve in your portfolio. Were you looking for a compound annual growth rate of 8% to 10% in your market portfolio? You might have to get used to less than that for a while. Other issues may also rear their ugly head along the way, such as sovereign currency risk and currency default.

This isn’t the only way we bet on the future, of course, and the path we take in life, our career, education, and our choices, will all influence our outcome.

The way forward

Thankfully, society and the economy are not static nor fixed. Productivity and efficiency increase with each and every passing year, allowing more to be produced with less. This will increase the amount of real goods available to the economy, thus allowing an increasing number of people to leave the workforce without lowering overall standards of living. In the long run, everyone’s wealth and standards of living will increase greatly.

Another trend is that a growing number of people won’t simply retire and live off their wealth, but they will instead take up new lines of work, perhaps ones in which they can be more creative, now that they are no longer constrained by the requirements of corporate life.

The catch to this increasing productivity is that as living standards rise and as the middle class in India and China grow and prosper, the pressures on our limited resources increase. In order to support increasing living standards and stave off decline, we’ll have to get cracking on improving clean energy production and manufacturing processes. Nanotechnology is going to play a big role in this, and in fact, I believe it is the door which leads to a successful future for us.

How to really bet on the future

Just for fun, you can try your hand at the prediction markets, and see how well you do!

So, what contingency plans do you have in place, should growth rates not be quite what you expect? Do you believe in the “Fallout” model of growth; that we’ll hit a wall, and that war and famine will be a result, or do you believe in the “Kurzweil” model of growth, which predicts a future of increasing automation, miniaturization, and clean production via nanotechnology, for all?

Related Posts Plugin for WordPress, Blogger...

Filed Under: Growing Your Wealth, Investing, Market Analysis, Miscellaneous, Opinion, Philosophy Tagged With: betting, gambling, growth, interest, lifestyle, nanotechnology, planning, prediction markets, rat race, retirement, riches, savings, speculative bubble, wealth

About Kevin

Kevin has left the office, and he is currently fighting the rat race by working on his own business. He enjoys exploring unvisited places around the world and gaining new experiences. He believes that by properly managing our energy and time, we can learn to invest our lives wisely.

Comments

  1. Everyday Tips says

    June 25, 2010 at 7:18 pm

    I don’t really have a contingency plan for my savings, I just save as much as I can and hope for the best. I am starting to invest in my dividend stocks so at least some is some revenue in down times. I do recognize dividends can be cut, but at least it is something, hopefully for awhile.

    I used to work in IT, and most of our jobs were in the process of being outsourced overseas when I left. I fear that is going to be the norm more and more. It is almost like we need a new ‘Industrial Revolution’ to get our nation kick-started again, and maybe the areas you mentioned will be just the thing to do it.

    • Kevin says

      June 27, 2010 at 4:10 pm

      You know, I work in IT today, and I can see danger for a lot of large organizations that are unwilling or unable to adapt to change. I sometimes get nervous when I think of all the educated people in China and India that are just waiting to grab our jobs. I also see a lot of promise and opportunities for more adaptable and nimble firms that are able to capitalize on these changes.

      As hard as governments may try, consumption on other people’s production cannot last forever, so the free ride is slowly coming to an end. We gotta remember that it’s not a zero-sum game, though. New opportunities open all the time, if we are willing to embrace them instead of trying to hold on to the old ways. I am also trying to keep my current consumption down so that I can save and invest more, and at the same time, I’m trying to educate myself in all those areas where I am sorely lacking, so I can be better prepared as the shift comes.

  2. Mich @ BTI says

    June 30, 2010 at 12:56 pm

    Kevin,

    The only gamble i am willing to take is this: the economy will not crash and burn, we will not go through the fall out. It’s kind of a calculated risk after looking back to the last 100 years. The market can correct all it wants, in the end things will get back on track again. Which is why i always buy when the markets are bloody, especially dividend paying stocks since you get paid to wait…I will be posting about my one and only gamble next week.

    Mich

    • Kevin says

      July 3, 2010 at 12:49 am

      In the long run, the markets usually do recover, though I do recall a certain famous someone also once said that “in the long run, we are all dead.” 😉

  3. JeffK says

    January 23, 2011 at 9:53 am

    How is the mortgage disaster, and free fall in home values, likely to be remedied if individuals can not obtain a new job? There are millions of individuals that already lost their houses to foreclosure and many more will unless the United States starts generating something more then debt. It’s time to change the trade policies with China. For crying out loud, our greatest trade partner is communist!

Trackbacks

  1. Personal Finance Links – Minimum Wage Edition says:
    June 28, 2010 at 5:02 pm

    […] Invest it Wisely talks about betting on the future. […]

  2. Wealth Artisan University #1 - The Wealth Artisan says:
    November 23, 2011 at 5:38 pm

    […] Invest It Wisely highlights the uncertainty of our economy, but also provides the silver lining on the horizon when he discusses betting on the future. […]

  3. A Frugal Manifesto | Financial God says:
    February 21, 2012 at 5:19 pm

    […] lengthening lifespans, less deaths from disease, and an increasing quality of life in the future. Betting on the future is a pretty good bet to make, in my […]

About Invest It Wisely

Invest It Wisely is about evaluating the choices that each of us face everyday. It’s about investing your time, your money, and your energy wisely, in order to achieve your goals. The end goal is maximizing your life expectation, and exploring the ways to get there.

Subscribe!

Subscribe via RSSSubscribe via EmailSubscribe via TwitterSubscribe via Facebook

Most Popular Posts

  • How to Get Fit, Feel Better, and Get Rid of Your Foggy Head: A Few Simple Steps
  • 3 Frugal Ideas for a Romantic Valentine’s Day
  • What Would You Do with a Million Dollars?
  • The Importance of Opportunity Costs, and Why They Should Not Be Ignored
  • What Do You Need to Get out of the Rat Race and Achieve Financial Freedom?

Categories

  • Avoiding Scams
  • Book Reviews
  • Crypto Trading
  • Currency Trading
  • Economics
  • Financial Freedom
  • General Reviews
  • Growing Your Wealth
  • Healthy Living
  • Insurance
  • Interviews
  • Investing
  • Investing
  • Market Analysis
  • Miscellaneous
  • Motivation
  • Opinion
  • Paying Down Debt
  • Philosophy
  • Precious Metals
  • Reader Questions
  • Real Estate
  • Relationships
  • Saving Your Money
  • Small Business Solutions
  • Stories
  • Uncategorized
  • Weekend Reading

Archives

Invest It Wisely Copyright © 2016
Creative Commons License
This work by Invest It Wisely is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License
Permissions beyond the scope of this license may be available at http://www.investitwisely.com/contact

Posting....