Question

Suppose that your friend comes to you with this great idea of investing in the stock market:

“The number of senior citizens will double by 2050. So, one way to make money is to invest in companies that produce goods and services that senior citizens need.”

Does this seem like a good strategy in the stock market? What is wrong with this argument?

Answer 1

The investment in stock markets should be done only after understanding the fundamentals of companies. Which includes their debt structure, demographics of its boards, divided policy. One must also take in account the external factors such as legal obligations and government policies. The market conditions also play a role as the reflect the state of economy.

The statement here only focused on increasing demand as senior citizens will double over the period of next 30 years. The statement doesn't consider any other fundamental of market. You can't invest in market only considering a single fact