June was a good month for the U.S. stock market with the S&P 500 gaining 1.87% and all the major indexes (Dow Jones 30, NASDAQ 100 and S&P 500) achieving record highs. With an economy that is ”not too cold and not too hot” supported by an accommodating Federal Reserve, a bullish trend should continue into the second half of 2014.
As such, we will maintain our Asset Allocation formula as indicated in our updated TSOA Freedom Portfolio Asset Allocation for Retirement Accounts Models. In addition, we will continue our emphasis on investing more in value-oriented equity investment choices rather than growth-oriented equity choices.
Investors should also look to longer term investing mega-trends, such as the economic and financial impact of Boomers and those who are age 50 plus in other developed countries. Boomers are currently described as those who are between age 50 and age 70. Here are three key economic factors to consider when looking to profit from the Boomers’ impact on the American and world-wide economies:
- The amount of investible assets owned by investors age 60 and older will grow from $87 trillion to $400 trillion by 2050.
- Healthcare needs, especially for new medications, will explode as the world’s population of 60-year olds will increase from 11.7% of the overall population to 21.1% in 2050.
- U.S. Boomers account for 85% (and growing) of the global luxury travel expenditures (think companies that provide or own cruises, tours, vacations, hotels, airlines, etc.).
Given the above, we suggest investors seriously investigate and consider allocating a portion of their equity portfolios to:
- Exchange-Traded Funds (ETFs) that will benefit from an aging population, such as PowerShares Dynamic Pharmaceuticals/PJP, SPDR S&P Capital Markets ETF/KCE, Vanguard Health Care ETF/VHT, and PowerShares Dynamic Leisure & Entertainment Portfolio /PEJ
- Individual stocks, such as hotels (Hyatt/H, Hilton/HLT, Marriott/MAR), travel services (TripAdvisor/TRIP, Expedia/EXPE, Orbitz/OWW), and cruise lines (Royal Caribbean Cruises/RCL)
- A portfolio of entertainment (or “fun”) stocks as represented by our Fun Stocks Index, which has gained 650% since January 2009, beating all the major indexes since that date.
All of these investment choices should continue to perform well as part of the Boomer mega-trend for the near future as well as the next 35 years of the “Boomer Era”!