Tuesday, 10 May 2016

Want to take advantage of global aging? Focus on the rich elderly.....the baby-boomers

Humanity is aging. Fast. Over the next decade, the world is going to be hit by a tsunami of retiring baby-boomers. After that, another huge wave from Generation X is going to retire. This secular demographic trend cannot be stopped. There is no breaking point. There is no reversion to mean. There is simply no going back to a world of high birth rates anymore.

This group of future retirees has greater spending power than their predecessors. In my opinion, old people can be categorised into 2 groups - the recently-retired healthy elderly who are still active with more spare funds for lifestyle consumption and the extreme elderly (those in their 80s/90s) who spend most of their funds on healthcare or nursing services.

Higher demand for stable dividend-paying bluechips and bonds
Can you imagine a 70 year-old retiree sitting at the desk, his eyes glued to the computer screens as he stares at charts through his blurry eyes? I can't. And even if he happens to be an extremely healthy individual, does he want to spend his golden years and remaining time on Earth doing risky trades everyday? I doubt so. What he probably desire is a stable flow of passive income to fund a comfortable lifestyle and maintain a respectable quality of life. He no longer has the same voracious appetite and high tolerance for market risks and volatility. Most of his funds should be in income-producing assets like bonds, fixed deposits and dividend-paying bluechips. Right now, the younger generation of investors like us can take advantage of this future investment trend by getting into these dividend-paying bluechips early. Do not wait until you are in your 70s or 80s before making the switch.

A report posted on April 20 on the Singapore Exchange's My Gateway portal reveals that the STI offers the highest dividend yield in a study of 10 major stock indices across Asia. The 30-stock index yields 4.1% in dividends versus an average of 2.8% for the region. Hong Kong's Hang Seng Index is a close second with a dividend yield of 4%. Hong Kong is another rapidly aging country. 

Higher demand for air travel
Going on long overseas leisure trips seem to be a rising trend with the retirees in recent years. They are even posting pictures and videos on social media platforms. Who says grandparents cannot be cool? They love travelling with their spouses, family members or friends. Compared to their predecessors, baby-boomers prefer to pursue experiences rather than material possessions in retirement. This will potentially create traffic growth for aviation hubs like Changi Airport, thus generating more revenue for companies like SATS and SIA.

Higher demand for aged care services
Lastly, we move on to those extreme elderly who will increase the demand for nursing homes, clinics and hospitals. The rich baby-boomers can afford the premium prices at the private healthcare establishments such as Mount Elizabeth, Gleneagles and Raffles Hospital. As a result, companies like IHH, PLife REIT and Raffles Medical Group stand to benefit from an increasing demand for aged care services.


How will SG100 look like? Full of old people.....

2 comments:

  1. Hi DK

    I smell RMG and Sats in your watchlist ;)

    ReplyDelete
    Replies
    1. Hi B,

      You are sharp :)

      Yes. I am waiting patiently to accumulate more RMG and SATS if their valuations ever become attractive again.

      Delete