The baby boomers, according to many commentators, is a designated group of individuals born between approximately 1946 and 1964. This generation is referred to as the baby boomers because there was a statistically significant increase in the birth rate over this period. This generation has dramatically shaped the economic and cultural environment over many years and is likely to be influential as it moves into old age. As of 2016, it is estimated that for the next 14 years, 10,000 baby boomers will turn 65 each day in the United States.

The baby boomers have an average annual expenditure that is less than other age demographics, according to the Bureau of Labor Statistics (BLS); however, they have the most assets and disposable income. An aging population has a significant impact on consumer spending trends; this creates abundant opportunities for companies in specific sectors and industries well positioned to benefit from the spending patterns of this generation. The health care and financial sectors are likely beneficiaries as they offer products and services that specifically meet the baby boomers’ likely insatiable demands.

As members of this generation continue to age, they require products and services from pharmaceutical, biotechnology, aged-care, hospital management and medical equipment companies. Baby boomers spend between $15,000 and $20,000 annually on health care, according to Centers for Medicare and Medicaid Services; this is substantially more than any other age demographic. Products and services of financial companies may experience increased demand as the baby boomers filter through retirement age requiring advice and access to asset management and increased levels of health insurance. Investors wanting to gain exposure to the baby boomers’ spending patterns may want to consider the following three mutual funds.

Fidelity Select Pharmaceuticals Portfolio (FPHAX)

The Fidelity Select Pharmaceutical Portfolio (“FPHAX”) invests 80% of its assets in companies involved in the development, manufacture and distribution of a wide variety of pharmaceuticals. It typically invests in both domestic and foreign stocks. The top holdings include Johnson & Johnson (NYSE: JNJ), Allergan PLC (NYSE: AGN), and GlaxoSmithKline PLC ADR (OTC: GLAXF). The fund is well positioned to reap the benefits of the baby boomers' increased need for pharmaceutical products as they age. FPHAX requires a minimum investment of $2,500 and has $1.6 billion in net assets. 

Fidelity Select Medical Equipment and Systems Portfolio (FSMEX)

The Fidelity Select Medical Equipment and Systems Portfolio (“FSMEX”) invests the majority of its assets in domestic and foreign stocks involved in research, development, manufacture, distribution, and sale of medical equipment and devices. The stocks that make up the fund’s top three holdings are Medtronic PLC (NYSE: MDT), Boston Scientific Corporation (NYSE: BSX), and Intuitive Surgical Inc. (NASDAQ: ISRG). The fund provides concentrated exposure to medical equipment and systems companies that are likely to experience a rise in demand for products that assist hospitals, physicians and older consumers as the population ages. It has net assets of $2.8 billion and an expense ratio of 0.76%. FSMEX requires a minimum investment of $2,500. 

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