Today Richard Young makes a case for investing in health care in the U.S. and abroad, and recommends an ETF that provides broad exposure to the sector. This ETF, which pays an annual distribution, is appropriate for all investors.
Demographic Opportunities
from Richard C. Young’s Intelligence Report
Americans are getting older. The number of Americans over age 65 is increasing faster than any other age group and soon will be the largest portion of the population. From 2000 to 2010 alone, the population of Americans over 65 years old increased by 15.1%. And with age naturally comes increased risk of disease. Seventy percent of the deaths in America are caused by chronic disease, and it is predicted that 60% of Americans over 65 will have more than one chronic condition by 2030. ... But America isn’t the only country going through an aging process.
After World War II and the Chinese Civil War ended, the Middle Kingdom went through a baby boom, much like the United States. But in 1979, China artificially engineered a baby bust by implementing a one-child policy. The effect has been a rapidly aging population in China. In 2015, 220 million people will be older than 60 years in China. Within 40 years, China will be home to almost 500 million elderly people. And aging isn’t a phenomenon unique to China. The UN estimates that by 2022 the number of people over age 60 will pass one billion, reaching two billion by 2050. Those aging populations will demand much more healthcare than they do now.
As people in emerging markets get wealthier, they are demanding better medical devices and treatment options than they have had in the past. More people in emerging markets are moving into the middle class and getting insurance. A McKinsey & Co. report from 2012 said, “The Chinese middle class is expected to account for 75% of Chinese urban households by 2020, up from 25% today. Over 90% of the Chinese population already has some form of insurance, up from 45% in 2006. Similarly, the insurance market in India is rapidly growing, with 45% of India’s population expected to have some form of insurance by 2020, up from ~25% today.”
Vanguard Health Care ETF (VHT)
The mix of aging populations and increasing incomes across the world will drive sales of devices, drugs, and other medical products going forward. The American medical multinationals owned by the Vanguard Health Care ETF (VHT) are poised to deliver the types of products being demanded both here at home and abroad.
In VHT’s top 10 holdings are powerhouse companies like Johnson & Johnson, Pfizer, Merck, and Bristol-Myers Squibb. The low 0.14% expense ratio and 1.6% yield ETF tracks the MSCI US Investable Market Health Care 25/50 Index.
Richard C. Young, Richard C. Young’s Intelligence Report, www.intelligencereport.com, 800-301-8968, September 2013