Booming is business
Want some of that Baby Boomer wealth to come your way? Susan Edmunds lists a few things to think about.
Much is said about the wealth gap between younger generations and the Baby Boomers. But while it might feel like they have most of the money at the moment, an ageing population may create opportunities for young investors, investment experts say.
Here are some things to think about if you want to cash in.
Stocks that provide income
With interest rates so low, many older people are having to look beyond the bank for places to put their money and turn a lump sum into income.
That has already pushed up the value of shares in companies that provide a strong dividend yield, such as utility and infrastructure providers.
Andrew Bascand, managing director at Harbour Asset Management, said that trend would probably continue given older people needed a flow of money to sustain themselves.
‘‘That can’t be provided by putting money in term deposits.’’
Although share prices are high by historic standards, that search for income may provide more support for some than others.
Retirement care providers
Providers of aged care have proved a good investment in recent years.
Ryman shares have moved up from 33c at the start of 2003 to $13.86. Its annual meeting this year was told that it planned to add 20 new villages to its portfolio.
Gareth Kiernan, chief forecaster at Infometrics, said those companies were likely to continue to be a good investment as demand increased for retirement villages and care facilities.
Residential property
Grant Davies, an investment adviser at Hamilton Hindin Greene, said the surge of Boomers could have an impact on the property market if they started to sell investment properties and holiday houses to fund their lifestyles. ‘‘How would that impact the property market at that point?’’
But Kiernan said it would be dangerous for young people who wanted to buy a house to hang back and wait in hope of a downturn. ‘‘You could find yourself locked out of the housing market.’’
He said that by the time Baby Boomer wanted to sell houses there were enough of their children in the market as first-home buyers to support prices.
There was also a noticeable trend of people wanting to stay in their houses, and in the cities they had lived in through their working lives, rather than downsizing to ‘‘retirement destinations’’ such as the Ka¯ piti Coast or Tauranga.
Travel is increasingly popular with fit retirees – a house in a holiday location that can be offered as a short-term rental could be a good investment. Houses that have been modified to be more accessible for people using wheelchairs are likely to also become more sought-after.
A small business
An increasing number of Baby Boomers will want to exit their businesses over the coming years.
There are already more than 63,000 people who are self-employed and aged over 65.
Many may be thinking about a succession plan and could be open to discussions about a staggered buy-in or leaving some equity in the business for the right buyer.
Healthcare
An ageing global population is likely to drive demand for healthcare and companies that are providing innovative healthcare solutions.
‘‘As the population lives longer, more money will be spent one way or another on health,’’ Kiernan said.
‘‘Private companies are going to have some role to play.’’
Education
Bascand said there was a global trend to spend more money on education, which may boost the value of some specialist providers.
He said that as couples had fewer children, the attention of grandparents was increasingly focussed on fewer kids, which could be lucrative for companies that catered for the younger generations.
But watch out
There’s a big caveat to keep in mind.
Kiernan said he was hesitant to make predictions about the performance of any asset classes over the next 10 or 15 years.
‘‘Experience tells me the market can turn out very different to what we expect.’’
The best solution is likely to be to put your money into diversified investments that fit your risk profile, and not worry too much about how reliable your crystal ball might be.
‘‘As the population lives longer, more money will be spent one way or another on health.’’
Gareth Kiernan
Chief forecaster, Infometrics