By 2050, one in six people in the world will be over age 65 (16%), up from one in 11 in 2019 (9%), according to the United Nations. An aging population throughout much of the developed world even prompted the Group of 20 nations (G-20) finance ministers and central bank governors earlier this month to address the issue during meetings in Japan, which is the country with the world's fastest-aging population.
This huge and growing market provides a plethora of opportunities for companies positioned in health care, pharmaceuticals, senior living facilities, and other sectors that contribute to increasing lifespans and extending quality of life in advanced age. "Aging is, with no doubt, one of the strongest, one of the least cyclical, one of the most permanent trends in the market," said Vafa Ahmadi, head of thematic equity management at CPR Asset Management, per CNBC. Ahmadi added that consumer spending of aged adults will represent $15 trillion in 2020.
Those seeking to gain exposure to the longevity economy should consider these three exchange-traded funds (ETFs) that zone in on companies poised to benefit from an aging population. Let's take a close look at the metrics of each fund and how traders could play them using technical analysis.
The Long-Term Care ETF (OLD)
Launched in June 2016, the Long-Term Care ETF (OLD) aims to track the performance of the Solactive Long-Term Care Index. The benchmark comprises companies focused on senior housing, nursing services, hospitals for the elderly, and biotech for age-related illnesses, as well as firms that supply such facilities. The fund's top two holdings – Welltower Inc. (WELL) and Ventas, Inc. (VTR), both real estate investment trusts (REITs) that specialize in senior living – command a cumulative weighting of 33.75%. Traders may find it best to use limit orders given the ETF's average 0.31% spread and daily turnover of roughly 5,500 shares. As of June 24, 2019, OLD has assets under management (AUM) of $16.70 million, offers a 1.99% dividend yield, and is up nearly 16% year to date (YTD). The fund's 0.35% management fee sits around the 0.32% category average.
OLD's share price broke above a four-month trading range in early June and has since continued higher. The relative strength index (RSI) gives an elevated reading above 60 that indicates short-term overbought conditions. Traders should look to enter on pullbacks to $28.50, where the price finds support from the top of the February to May range and rising 50-day simple moving average (SMA). Think about setting a profit target by measuring the distance of January's leg higher and adding it to the breakout point ($3.72 + $28.50 = $32.22 profit target). Position a stop beneath this month's low at $27.52 to protect trading capital.
Global X Longevity Thematic ETF (LNGR)
With net assets of $16.09 million, the Global X Longevity Thematic ETF (LNGR) provides traders with another option for gaining exposure to this lucrative segment of the economy. The fund seeks to offer similar investment returns to the Indxx Global Longevity Thematic Index – a benchmark that consists of companies from developed countries, such as the United States, Japan, and Denmark, that have a primary business objective to enhance and lengthen the lives of senior citizens. LNGR takes a sizeable bet on health care, with the ETF allocating nearly 90% of its portfolio to the sector. The fund charges a 0.50% management fee, issues a 0.63% dividend yield, and is trading up 12.81% on the year as of June 24, 2019.
Like OLD, the longevity bulls piled into LNGR in January but went missing over the next four months. They have returned this month, pushing the fund's price toward its 52-week high at $22.56 set on Oct. 1, 2018. A recent bullish cross of the moving average convergence divergence (MACD) line above the signal line confirms the ETF's upward momentum. Those who wish to buy the fund should look for an entry point at $21 – an area the price encounters support from a 12-month horizontal line. Consider booking profits at the 52-week high and setting a stop below the 200-day SMA.
Vanguard Dividend Appreciation Index Fund ETF Shares (VIG)
The Vanguard Dividend Appreciation Index Fund ETF Shares (VIG) attempts to provide similar investment results to the Nasdaq US Dividend Achievers Select Index. The fund invests in U.S. companies that have increased their annual dividends for 10 or more consecutive years – a characteristic retirees value highly as they seek to boost income. VIG, which charges a negligible 0.06% management fee, tilts toward the stable industrial sector, giving it a 24.39% allocation. It also takes sizable bets on technology and consumer cyclicals with respective weightings of 16.61% and 16.23%. The ETF holds 185 stocks, helping to diversify risk across its basket – another feature sought by retirees. A razor-thin 0.02% average spread and deep dollar volume liquidity of almost $100 million make this ETF suitable for all trading styles. As of June 24, 2019, VIG has a massive $41.21 billion asset base, yields 1.98%, and sports an impressive 18.29% YTD gain.
VIG shares have trended consistently higher throughout the first six months of 2019, apart from a 5% pullback in May. The fund's most recent leg higher started in early June, with a new 52-week high printing on Friday, June 21, at $116.36. An RSI reading just below 70 increases the likelihood of some consolidation before the ETF attempts its next move higher. Traders should look to enter on retracements to $113.50, where the April swing high now provides crucial support. Consider using a faster period moving average, such as the 15-day, as a trailing stop to let profits run. Manage downside risk by placing an initial stop below the 50-day SMA.