From silver tsunami to silver lining. The Silver Economy: short term trend or long term opportunity?

Investing in the silver economy is something usually underestimated by investors. There exist many financial investments that can help individuals in taking up this opportunity: they are mainly based on typical spending patterns of elders, which include among others healthcare companies and health and life insurance companies. The elderly are subjected to a positive trend across all countries, including developing ones where the majority of them live today: the number of elders globally is expected to double from 703 million in 2013 to 1.5 billion by 2050. Unexpectedly, trends that would be thought to go against global aging are actually aiding this process. This phenomenon will obviously lead to macroeconomic changes. Labour supply is expected to increase, including for those aged 65 and over. It is expected that in the G-20 economies between 2018 and 2030 aging will exert downward pressures on GDP per capita growth by an average of about 0.4 percent, with the late stage economies experiencing the highest decline of about 0.5 percent. The spending power held by this category is significant and due to an on average higher income than other categories. The average annual gross income coming from the State of 65+ people is, in fact, expected to be about 20000$ by 2030. Aging affects savings as well: the higher (lower) the old age dependency ratio, the higher (lower) will be the average household savings ratio. We also need to remember that increasing amounts of elders influence different government spending (especially in terms of health expenses and pension schemes). For example, in Europe in 2015 the expense for health services dedicated to those aged over 50 was €303b, two-thirds of all health spending and one-tenth of all public spending that year. It could be suggested that between now and 2050, absent policy changes and reforms, outlays for pension and health care could increase by around 7 and 6 percentage points of GDP in advanced and emerging G-20 countries respectively. Speaking more in depth about consumption, people over 50 outspend the average consumer across most categories, and the economic activity they generate affects all sectors of the economy. For example, in the US in 2018 older adults contributed to US$5.6tn to non-healthcare consumer spending or US$47.717 per capita in expenditure. On average senior consumers all over the world have similar consumer spending pattern. The most influenced sectors are real estate, healthcare and medicine, consumer purchases and financial services. As we invest, we discover that there are various asset classes through which we can take advantage of this trend. However, in this case we will take into consideration mainly ETFs. Those asset classes have an average total return of 3.93% and an average standard deviation of 18.23%, positioning themselves around the same standard deviation of the category while earning more than the general market. In addition to this, the total expense ratio of all the investment funds analysed is still less than the average (which is 2 – 2.5%).