Canada's Population Boom and XEQT: How Demographics Drive Long-Term Investment Returns

I started thinking seriously about demographics after a friend asked me a question I could not shake. We were grabbing coffee on a Saturday morning – one of those lazy weekend catchups where the conversation drifts from hockey to housing prices to the meaning of life – and he said something that stopped me mid-sip.

“You keep telling me to buy XEQT and hold it for 30 years. But what if the economy just… stops growing? What if there aren’t enough people to keep the whole thing going?”

I opened my mouth to give some confident reply about the magic of compound returns, and then I realized I did not actually have a good answer. Not a specific one, anyway. I believed the global economy would keep growing, but I had never really thought about why. What is the engine underneath all of it? What makes GDP go up year after year, decade after decade?

The answer, it turns out, is surprisingly simple. At the most fundamental level, economic growth comes from two things: more people, and those people becoming more productive. Technology handles the productivity side. But the “more people” part? That is demographics. And demographics, once you start paying attention to them, turn out to be one of the most powerful and predictable forces driving long-term investment returns.

So I went down a rabbit hole. I spent weeks reading about fertility rates, immigration targets, dependency ratios, and something economists call the “demographic dividend.” And what I found changed how I think about my XEQT portfolio – not because it made me want to sell, but because it gave me a much deeper understanding of why owning the whole world makes sense for the next 20 to 30 years.

Let me walk you through everything I learned.

1. Canada’s Population Explosion: The Numbers

Canada has been growing fast. Not in the way people usually think about it – we are not having a baby boom. Our fertility rate has actually dropped to roughly 1.3 to 1.4 children per woman, well below the 2.1 “replacement rate” needed to maintain a stable population naturally. Left to its own devices, Canada’s population would start shrinking within a generation.

But Canada is not being left to its own devices. The federal government has been running one of the most aggressive immigration programs in the developed world, and it has fundamentally changed the country’s demographic trajectory.

Here is what the numbers look like:

• Canada’s population crossed 41 million in recent years, up from roughly 37 million just a few years before that – an extraordinary pace of growth for a developed nation.
• Annual immigration targets have been set at approximately 400,000 to 500,000 permanent residents per year, with temporary residents (international students, temporary workers) adding significantly to the actual population count.
• Canada’s population growth rate has been running at roughly 2.5% to 3% annually in recent years when you include temporary residents – a rate more typical of a fast-growing developing country than a G7 nation.

To put this in perspective, here is how Canada stacks up against other G7 countries:

Canada is not just growing – it has been growing faster than every other G7 country by a wide margin. That gap is almost entirely driven by immigration policy, and it has profound implications for the economy, the housing market, government finances, and yes, your investment returns.

2. How Population Growth Drives Investment Returns

This is the part that really clicked for me. The connection between demographics and stock market returns is not abstract or theoretical – it is actually quite mechanical once you see it.

Here is the simplified chain:

1. More people means more workers entering the labour force.
2. More workers means more goods and services produced – i.e., higher GDP.
3. Higher GDP means more revenue flowing to businesses.
4. More revenue means higher corporate earnings.
5. Higher corporate earnings means higher stock prices over time.

This is not a controversial chain of logic. Economists have studied the relationship between population growth and GDP growth for decades, and the correlation is strong. Countries with growing populations tend to have growing economies. Countries with shrinking populations tend to stagnate.

Now, there are important nuances. Population growth alone is not enough – you need productive population growth. A million new retirees add to the population count but do not increase the workforce. What matters most is the growth of the working-age population – people between roughly 15 and 64 who are actually producing goods and services and earning incomes.

This is where Canada’s immigration-driven growth becomes especially interesting. Unlike natural population growth (babies being born), immigration tends to bring in people who are already working age. Canada’s immigration system is heavily tilted toward economic-class immigrants – skilled workers, entrepreneurs, and professionals who can contribute to GDP almost immediately upon arrival. They are not adding to the dependency ratio. They are adding to the productive core of the economy.

There is also a second-order effect that is easy to miss: consumption growth. Every new person who arrives in Canada needs:

• A place to live (housing demand)
• Food, clothing, and household goods (consumer spending)
• A phone plan, a bank account, insurance (financial services demand)
• Healthcare, education, transportation (public and private services demand)

Each of these needs creates revenue for Canadian businesses. And many of those businesses – the banks, telecom companies, grocery chains, and REITs that make up a huge portion of the S&P/TSX Composite – are sitting inside your XEQT portfolio through its Canadian allocation.

3. The Canadian Story: Immigration as an Economic Engine

Canada’s immigration system is not random. It is one of the most deliberately designed economic tools any country has ever built, and understanding how it works gives you a much clearer picture of why I am optimistic about Canadian economic growth over the next few decades.

The Express Entry system, which is the primary pathway for economic immigration, uses a points-based system that heavily favours:

• Education: University degrees, especially in high-demand fields like engineering, healthcare, and technology.
• Language proficiency: Strong English or French skills, which correlate with faster economic integration.
• Work experience: Candidates with years of professional experience are prioritized.
• Age: The system favours younger applicants, typically in their 20s and 30s, who have decades of productive working years ahead of them.

The result is that Canada’s immigrant population skews younger, more educated, and more economically productive than the general population. This is not a happy accident – it is by design.

Here is what this means in practical economic terms:

• Tax base expansion: More working-age immigrants means more income tax, sales tax, and property tax revenue for the government. This helps fund public services and reduces the per-capita burden on existing taxpayers as the population ages.
• Housing demand: This is the one everyone talks about, and for good reason. Approximately 400,000+ new permanent residents per year, plus temporary residents, all need somewhere to live. This creates sustained demand for housing construction, which flows into GDP through residential investment, construction employment, and the revenue of publicly traded real estate and construction companies.
• Consumer spending: New arrivals spend money from day one. Groceries, furniture, cell phones, transit passes – all of this flows into the revenue of Canadian businesses.
• Labour market gaps: Canada has persistent labour shortages in healthcare, skilled trades, technology, and agriculture. Immigration is the primary tool for filling these gaps, which keeps the economy running at capacity rather than being constrained by a lack of workers.
• Entrepreneurship: Immigrants to Canada start businesses at a rate that is comparable to or higher than the Canadian-born population. These businesses create jobs, generate tax revenue, and drive innovation.

Now, I want to be honest about the flip side. Canada’s rapid population growth has created real challenges, particularly in housing affordability and healthcare capacity. When population grows faster than infrastructure can keep up, you get the kind of strain many Canadian cities have been experiencing. These are legitimate concerns, and the government has been adjusting immigration levels in response. But from a pure investment perspective, the economic impact of a growing, young, skilled population is overwhelmingly positive over the long term.

4. The Global Demographic Map: What XEQT Captures

This is where things get really interesting. Canada is just one piece of the puzzle. When you own XEQT, you own the entire world – and different parts of the world are at very different stages of their demographic stories.

Here is a simplified overview of the demographic profile of each major region inside your XEQT portfolio:

This table tells a powerful story. Your XEQT portfolio is not just diversified across geographies and industries – it is diversified across demographic futures. You own:

• The young and growing: Emerging market countries where the median age is under 30 and the working-age population is expanding rapidly.
• The stable and productive: The United States, where moderate growth and high productivity per worker keep the economy humming.
• The immigration-powered: Canada and Australia, where deliberate policy choices are keeping the population young and the economy growing despite low fertility.
• The aging but wealthy: Europe and Japan, where populations are older but enormous accumulated wealth and productivity keep them relevant.

No single demographic story guarantees success. But owning all of them – as XEQT does through its global diversification – means you are never fully exposed to the risk of any one country’s demographic decline. You are always capturing growth from somewhere.

5. The Aging Problem: Why Diversification Matters More Than Ever

Let me tell you a story about Japan, because it is the most instructive example of what happens when demographics go wrong for investors.

In 1989, Japan’s stock market – the Nikkei 225 – hit an all-time high near 39,000. The Japanese economy was booming. Real estate in Tokyo was so expensive that the land under the Imperial Palace was famously said to be worth more than all the real estate in California. Japan was going to take over the world.

And then… it didn’t. The Nikkei crashed and spent the next three decades below its 1989 peak. An investor who bought at the top in 1989 and held would have waited roughly 34 years just to break even in nominal terms.

There were many reasons for Japan’s “lost decades” – a real estate bubble, monetary policy mistakes, banking crises. But underneath all of it was a demographic reality that made recovery extraordinarily difficult:

• Japan’s fertility rate fell below replacement in the 1970s and has stayed there since, dropping to roughly 1.2 in recent years.
• Japan has been extremely reluctant to accept immigration, keeping its population almost entirely native-born.
• The result: Japan’s population peaked around 2008 at approximately 128 million and has been declining since. It has one of the oldest populations on Earth, with a median age approaching 49.

When your population is shrinking and aging, you face a brutal economic headwind. Fewer workers means less production. More retirees means more government spending on pensions and healthcare. A shrinking consumer base means less demand for housing, goods, and services. Corporate earnings stagnate. The stock market reflects all of this.

Europe faces a milder version of the same challenge. Germany, Italy, Spain, and many Eastern European countries have fertility rates well below replacement. Unlike Japan, some have used immigration to partially offset the decline, but the overall trajectory for many European nations is toward older, slower-growing populations.

This is exactly why putting all your money in a single country – even Canada – is risky. If you had built a Canada-only portfolio in the 1990s, you would have been making a bet that Canada’s demographic and economic trajectory would be better than everyone else’s for the next 30 years. That is a bet you might win. But why take it when you can own the entire world instead?

The risk of home country bias becomes much more tangible when you think about it through a demographic lens. Canada’s immigration-driven growth is a policy choice, not a law of nature. Governments can change immigration targets – and indeed, the Canadian government has already adjusted them in response to housing and infrastructure pressures. If Canada were to significantly cut immigration for a sustained period, the economic growth engine would slow. Having roughly 75% of your XEQT portfolio in international markets means you are not solely dependent on any one country’s demographic choices.

6. Emerging Markets: The Demographic Dividend

Now let me flip to the other end of the spectrum. While Japan and parts of Europe face the challenge of aging populations, many emerging market countries are sitting on a demographic goldmine.

The demographic dividend is a concept economists use to describe the economic boost that happens when a country’s working-age population grows faster than its dependent population (children and elderly). When you have a big bulge of young, productive workers and relatively few dependents, the economy can grow rapidly – more people are producing, saving, and consuming, while fewer are drawing on public resources.

This is exactly what is happening right now in several major emerging market economies:

• India: With a median age of roughly 28 and a population that recently surpassed China’s, India is in the early stages of its demographic dividend. Hundreds of millions of young people are entering the workforce, driving economic growth that has been running at approximately 6-7% annually. India’s working-age population is expected to keep growing for decades.
• Indonesia: The world’s fourth most populous country, with a median age around 30 and a rapidly growing middle class. Indonesia has been one of Southeast Asia’s best economic performers.
• Brazil: Latin America’s largest economy, with a median age around 34 and a large, young workforce. While Brazil has its share of economic challenges, the demographic tailwinds are real.
• Philippines, Vietnam, Bangladesh, Nigeria: All have young, fast-growing populations that are fuelling rapid economic development.

XEQT captures these stories through its emerging market allocation, which currently sits at roughly 7% of the portfolio via the XEC ETF. That 7% gives you exposure to over 2,800 companies across 24 emerging market countries.

Is 7% enough? It is a fair question. Some investors argue that emerging markets deserve a larger allocation given their share of global GDP and population. But the market-cap weighting approach that XEQT uses reflects the investable value of these markets, not just their economic size. Emerging market stock markets are smaller relative to their GDPs because they are less financialized – many businesses are privately held, state-owned, or too small to be publicly listed. As these economies develop and their capital markets mature, their share of global market cap will naturally increase, and XEQT’s allocation will adjust accordingly.

The key insight is this: you do not need to guess which emerging market country will be the next China. You do not need to pick between India and Indonesia, or between Brazil and Vietnam. XEQT owns them all, weighted by their current market value, and it will automatically increase your exposure to whichever ones grow fastest. That is the beauty of a passive, globally diversified approach – the winners find their way into your portfolio without you lifting a finger.

7. How XEQT Self-Adjusts to Demographic Shifts

This is one of the most underappreciated features of a market-cap-weighted global ETF like XEQT, and it is particularly relevant when we are talking about demographics.

Demographic shifts happen slowly. Populations do not grow or shrink overnight. Fertility rates change gradually. Immigration policies evolve over years and decades. The economic effects of these changes take even longer to play out. You do not wake up one morning and discover that India’s economy has overtaken Japan’s – it happens gradually, over years, reflected in the changing market capitalizations of companies in those countries.

And here is the beautiful thing: XEQT automatically adjusts to these shifts through its market-cap weighting methodology.

Here is how it works in practice:

• If India’s economy grows faster than Japan’s, Indian companies will see their revenues, profits, and stock prices grow faster. Their market capitalizations will increase. As a result, India’s weight within XEQT’s emerging market ETF (XEC) will naturally increase, and your portfolio will have more exposure to India – without you doing anything.
• If Canada’s immigration-driven growth leads to a booming economy, Canadian companies will benefit, their market caps will grow, and the Canadian portion of XEQT (XIC) will reflect that success.
• If Europe’s aging population leads to slower growth, European companies will grow more slowly, their market caps will stagnate relative to faster-growing regions, and their weight in XEQT will gradually decline.

You do not need to predict which regions will win or lose the demographic game. You do not need to rebalance based on population forecasts. The market does it for you in real time. Companies in growing, dynamic economies attract capital, their valuations rise, and their share of global market cap increases. Companies in stagnating economies do the opposite. XEQT, by tracking market-cap-weighted indexes, simply follows the money.

This is a fundamentally different approach from trying to time demographic trends yourself. Could you look at India’s young population and decide to overweight Indian stocks? Sure. But you would also need to get the timing right, manage currency risk, navigate unfamiliar markets, and avoid the dozens of things that can go wrong when you try to make active bets on macro trends. With XEQT, you sidestep all of that complexity and let the market’s collective wisdom do the work.

I think of it like this: demographics are the current, and XEQT is a sailboat that automatically trims its sails to catch whatever wind is blowing strongest. You do not need to be a sailor. You just need to stay on the boat.

8. What This Means for Your 20-30 Year XEQT Strategy

Let me bring this all the way back to my friend’s question over coffee. “What if the economy just stops growing?”

Now I have an answer – a real one, backed by data and demographics.

The global economy is not going to stop growing over the next 20 to 30 years. Here is why:

• The world’s population is still growing. The UN projects the global population will reach roughly 9.7 billion by 2050, up from approximately 8 billion today. That is nearly 2 billion more consumers, workers, and entrepreneurs.
• The emerging market demographic dividend is just getting started. India, Southeast Asia, and parts of Africa are entering the sweet spot of their demographic transitions. Hundreds of millions of young people will be entering the workforce, starting businesses, and building wealth over the coming decades.
• Canada’s immigration-driven growth is a deliberate policy choice that can be sustained for decades, keeping the Canadian economy growing even as fertility rates remain low.
• Technology and productivity gains will amplify the effect of population growth. More people using better tools equals more economic output.
• Even in aging economies, growth does not stop – it just slows. Japan and Europe will continue to have productive economies, innovative companies, and significant consumer spending. They just will not be the primary engines of global growth.

For an XEQT investor with a 20 to 30 year time horizon, the demographic picture is overwhelmingly positive. You own the whole world. You are capturing growth from young, booming populations in emerging markets. You are capturing the stability and innovation of the American economy. You are capturing Canada’s immigration-driven expansion. And you are doing all of this through a single, low-cost, automatically rebalancing ETF.

The demographics are on your side. The question is not whether the global economy will grow – it is whether you will be invested in it when it does.

Here is what I would focus on:

1. Keep investing regularly. Dollar-cost averaging into XEQT ensures you capture growth regardless of short-term market fluctuations. Use the XEQT calculator to see what consistent contributions can grow to over 20 to 30 years.
2. Resist the urge to overweight one region. It is tempting to load up on emerging markets because of their demographic tailwinds, or to avoid Japan because of its aging population. Do not do it. XEQT’s market-cap weighting already handles this for you.
3. Think in decades, not years. Demographic trends are slow-moving but incredibly powerful. A population boom does not boost stock markets overnight – it plays out over 10, 20, 30 years. That is exactly the timeframe an XEQT investor should be thinking in.
4. Do not panic over short-term immigration policy changes. Governments will raise and lower immigration targets in response to political pressures. These short-term adjustments do not change the long-term demographic picture for Canada or the world.
5. Remember that demographics are not destiny. They are a powerful tailwind, but they do not guarantee returns in any specific year or even decade. What they do is make the long-term odds overwhelmingly in your favour – and that is exactly the kind of edge a patient, disciplined investor wants.

9. Conclusion

Demographics are not the flashiest topic in investing. They do not make for exciting headlines. Nobody goes viral on social media for talking about fertility rates and dependency ratios. But they are one of the most powerful, most predictable, and most underappreciated forces shaping long-term investment returns.

When you own XEQT, you are not just buying a basket of stocks. You are buying into the demographic future of the entire planet. You own a slice of Canada’s immigration-driven growth engine, the American economic juggernaut, Europe’s mature but wealthy markets, and the young, booming populations of the developing world. You own the demographic dividend – all of it, automatically, in a single ticker.

The next time someone asks you why you are so confident about investing for 30 years – why you believe the economy will keep growing – you have an answer now. It is not blind optimism. It is not faith in stock market magic. It is demographics. More people, becoming more productive, creating more value, decade after decade. And as an XEQT investor, you are positioned to capture all of it.

That is the kind of tailwind I want at my back.