Want to be as rich as retirees? Buy shares in them
Firms selling to British retirees have rocketed in value this year – Simon Hunt asks why.
The Nasdaq 100 is up around 14 per cent since the start of the year, at the time of writing, while the FTSE 350 is up 9 per cent. But one stock portfolio is doing better than both. I call it the OAP ETF.
This is a basket of 10 London-listed firms that cater for the silver-haired members of our society – and it’s rocketed a solid 18 per cent since January. It comprises things like cruise business Saga, care home owner Target Healthcare REIT, pensions and annuity business Legal & General, and hip and knee replacement maker Smith & Nephew.
Perhaps it should come as no surprise that those that look after the retired are outperforming. The outsized wealth of the Boomer generation is already well-documented, and with current demographic trends, the market is getting bigger every year.
In mid-2024 there were 1.8m people aged 85 years and over, making up 2.5 per cent of the population, according to data from the Office for National Statistics. But by mid-2049, this is projected to have doubled to 3.6m, representing just shy of 5 per cent of the total UK population.
In other words, there’s good reason to think my OAP ETF has some way to run – that’s double the number of cruises, and four times the number of knee replacements.
In times of uncertainty, such as we’ve seen over recent months, there is also a solidity of cashflow that comes from the reliable, consistent spending of retirees, argues AJ Bell investment director, Russ Mould.
“There’s a perception that that generation is doing well for itself and is looking after itself,” Mould says.
“They’re not facing some of the pressures of young people like student loan repayments and saving for a house.
“Meanwhile, there’s been a reappraisal of other sectors that have been seen as go-getting, with investors seeking reassurance as to how spending on AI will deliver a return on capital.”
The present generation of adults may never enjoy the levels of wealth of the boomer generation above them – but profiting from their spending habits may be the next best thing. Sometimes, the old ways are the best ways.