Growing Your Wealth as Australia Grows Older

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Last week Investment Director Meagan Evans and I introduced you to the Albert Park Investors Guild. If you’ve been following along, you’ll know we’ve decided to open up our global network of investment wizards to new members. If you missed that series, click here to visit the archives.

Today I’d like to address the million dollar question. It’s a question we receive from readers on an almost daily basis. ‘What’s the best investment idea I should focus on today?’ I call it the million dollar question, because what you’re really asking with this question is, ‘How can I make a million dollars the easy way?’

Now brace yourself for my disappointing answer. You can’t! Even if you managed to pick a stock that tripled in value, you’d need to invest half a million dollars to make a million. And if you’re like most everyone I know, earning that first half a million dollars is far from easy. And you would be…err…less than wise to invest all of it in a single growth stock.

Creating, preserving, and growing your wealth is a long term process, It requires patience, diligence, hard work, and knowledge. Make no mistake; knowledge is a corner stone of this process. This is where the Guild’s board member’s centuries of combined knowledge of the investment world can make a huge difference. But the patience, the diligence, and the hard work…that has to come from you.

With that said there are certainly some exceptional investment ideas that are worth your attention. I say ‘some’ exceptional ideas because there is no single answer. It’s what we referred to as the Golden Rule in your Daily Reckoning last Tuesday. Concentrating all your money in a single ‘best investment idea’ is highly risky, no matter how good the idea.

So let me share one of the best long term investment ideas available to you today. It’s already a growing sector and almost certain to boom over the coming decade and beyond.

I’m sure you’ve heard of Australia’s changing demographics. More people are living longer, which is a good thing. And fewer people are having children, which may or may not be a good thing depending on your personal affinity for crowds.

Japan is ahead of the curve in these demographic shifts. And various companies are already looking to capitalise on this huge trend. Japanese investment management firm, Whiz Partners Inc., is planning to launch its second healthcare fund. Now we’re not recommending you invest in Whiz at this time, but they are on the right track. According to Bloomberg:

The fund will start as early as October and invest in convertible bonds and warrants of about 10 health-care companies, with market capitalizations of as much as 50 billion yen ($491 million), said Managing Director Tomoyuki Fujisawa… Whiz plans to capture rising demand for capital among health-care related companies in Japan as they seek to expand their businesses abroad.

Australia is younger than Japan, but also rapidly ageing. Take a look at the chart below.


Australia's population demographics in 2013 Chart


Source: CIA World Fact Book

 

This is classically called a population pyramid. Only you can see that this pyramid is fatter in the middle than at its base. Australians are having fewer children and the baby boomer generation is greying. The nation is ageing, and the number of people in the 50-64 year age brackets is higher than it’s ever been before. In fact, the number of Australians over 65 will almost double to 6.8 million by 2040.

What does this mean to you as an investor?

The government forecasts that Australia will need 74,000 new nursing home residences by 2022. This is an increase of 30% on existing facilities coming into demand over the next eight years at an estimated cost of $25 billion. And that’s just nursing homes.

As people get older, they also, unfortunately, tend to spend more time in hospitals. The bar in the above graph representing the 65-69 year olds gives you an idea of how many 75-79 year old Aussies there will be in ten years. And medical advances mean they’re likely to live far longer than their parents. And they’ll likely spend far more time and money on medicine and specialised care as well.

Now certainly not every company involved in providing for these ballooning demands is going to do well. But the right forward thinking companies stand to make fantastic gains over the next eight years. A three-fold or greater increase in share prices is certainly not out of the question.

And these are exactly the types of well-positioned, quality companies recommended in the Guild portfolios.

Tomorrow we’ll have a look at investing overseas.

Regards,

Bernd Struben
Chairman, Albert Park Investors Guild

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Bernd Struben

Bernd Struben

Bernd Struben is the Managing Editor of Port Phillip Publishing. Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.
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Jason
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Australia shouldlook at the scaleofthe aging problem in East Asia, they actually have a realproblem with population aging. Immigration is no solution and no qualified demographer would even think it is for the folowing reasons: 1) Immigrant soirce countries have falling fertility rates and aging populations,soon decline. And Australia brings in immugrans from places with the world’s lowest fertility rates. 2) Contrary to the urban myths,Immigrant fertility fall drasitically within a generations. Just look at what is happening in America with the Hispanic fertility rate, it plunged from 2.8 in 2007 to 2.1 in 2014 and is still falling! Even… Read more »
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