News flash… the entire world is getting old.
In case you haven’t noticed firsthand, here are some shocking facts about our aging population…
Every year, over 3.6 million baby boomers are retiring.
That’s 10,000 people every single day!
The U.S. Census Bureau reports that by 2060, 92 million Americans (20% of the population) will be 65 or older.
Seventy percent of the disposable income in the U.S. is in their hands. They drive at least $7.1 trillion in annual economic activity.
That’s around 46% of the entire U.S. economy.
By 2032, this economic growth is expected to surpass $13.5 trillion. And that’s just in the United States…
Right now, Baby Boomers are turning 65 and leaving the workforce at a rate of one every 9 seconds.
About 72 million of them make up 28% of the entire U.S. population.
By 2050, 81 million of them will reach retirement age.
Not only is the country getting older, we’re getting healthier, which means it’s going to get older than ever before. By 2040, people around the world over 65 will eclipse the entire U.S. population.
So how are investors thinking about that? How are you thinking about that?
I, for one, am counting on long-term investments in the health care sectors. Here are the easiest and safest ways to play this trend…
While everyone is hanging on Janet Yellen’s each and every word to decide how to invest their money, the savvy investors are looking much further ahead. What you should be looking at are these historically seismic shifts.
Like the aging of America…
The main question to ask is: what will these older citizens need?
The first answer is health care. Americans over 65 are three times more likely to go to the hospital. They spend about half of all health care dollars going for hospitalization.
Between 2000 and 2014, U.S. health care spending doubled from $1.5 trillion to $3 trillion.
That is part of the reason that the health care sector has been heating up for a decade. Since 2006, the S&P 500 Health Care Index has gone up by 229.43%!
This trend will continue to grow exponentially.
The easiest and cheapest way to cash in on this trend in one fell swoop is the iShares US Healthcare Providers (NYSE: IHF).
This ETF tracks the investment results of the Dow Jones U.S. Select Health Care Providers Index composed of U.S. stocks in the health care providers sector.
Here are the top 5 holdings:
| Company | Symbol | % Assets |
|---|---|---|
| UnitedHealth Group Incorporated | UNH | 13.40 |
| Express Scripts Holding Company | ESRX | 7.18 |
| Aetna Inc. Common Stock | AET | 6.42 |
| Anthem, Inc. Common Stock | ANTM | 5.78 |
| Cigna Corporation Common Stock | CI | 5.44 |
It has $689.36 million in assets, an expense ratio of 0.44% and a 52-week range of $96.02 – $146.77.
IHF has doubled over the past five years, and I believe that it will do far better over the next five — and especially the next 20.
But another sector will be an even bigger driver for your personal profits…
While the aging population will certainly need health care, they will also need a place to live.
Retirement communities, senior apartments, assisted living, and all sorts of real estate associated with this demographic are sprouting all over the country. But supply of these properties is still extremely low. Demand will only rise as more Americans age.
You see, the current growth rate of senior housing units is just 21,950 units per year. To keep up with demand, 60,000 units per year are needed.
In other words, a 173% increase per year is required to even meet the demand, which is projected to peak in 2044.
All told, six million boomers will need generation-specific housing — according to the American Seniors Housing Association.
That’s why I’m bullish on Real estate investment trusts, or REITs.
REITs are companies that own income-producing real estate — basically they charge rent to businesses. These businesses could be shopping malls, restaurants, apartment buildings, self storage facilities — or for our topic today, health care properties like hospitals, extended care facilities, or retirement homes.
Essentially, you are becoming a landlord without all of the hassle of actually taking care of properties yourself.
REITs are also well known for their incredible dividend payouts. That’s because REITs — by law — must pay at least 90% of pretax income as dividends
That leads to some great returns from long-term investors.
In fact, The Dow Jones REIT index (DJR) is the best performing U.S. index over the last 15 years, compounding at 11%. (that is despite crashing 70% from 2007 to 2009 during the great recession.)
It’s safely returned 45% over the last five years, not including those juicy dividend payouts.
I have an easy way for you to play this sector as well.
Vanguard REIT ETF (NYSE: VNQ)
The Vanguard REIT ETF tracks the performance of publicly traded equity REITs, specifically the MSCI U.S. REIT Index.
Here are its top 5 holdings:
| Company | Symbol | % Assets |
|---|---|---|
| Simon Property Group, Inc. Comm | SPG | 8.13 |
| Public Storage Common Stock | PSA | 4.71 |
| Equity Residential Common Share | EQR | 3.24 |
| Welltower Inc. Common Stock | HCN | 3.21 |
| AvalonBay Communities, Inc. Com | AVB | 3.16 |
This ETF is huge: it has $58.50 billion in assets. VNQ also sports a tiny expense ratio of 0.12% and a 52-week range of $70.89 – $86.82. My favorite part of this ETF is the generous 4.2% dividend yield.
VNQ has returned around 45% over the past five years — without the dividend considered — and is spring-loaded to do far better over the next five.
Look, I know it’s no fun thinking about getting old. It’s also no fun reaching your golden years without the investments and means to enjoy them. These two plays on an unstoppable trend like retiring baby boomers are the best and easiest ways to bank some cash over the next decade or more.
Do yourself a favor and get while the gettins’ good.
