The baby boomers have been a huge purchasing force in the U.S. for the past 30, almost 40, years. They have now begun to shift gears to retirement and their buying will continue be a driving force, but it will be in different areas.
A recent MarketWatch article by Robert Powell says we have to start adjusting a portion of our portfolios to match the change in their spending.
This is part one of three of how to do exactly that: follow the boomers’ money!
Retired boomers will spend an average of 35% of their income on housing, 14% on transportation, 13% on out-of-pocket healthcare, 12% on food, 5% on entertainment, 3% on apparel and another 17% on miscellaneous items: travel, alcohol, etc.
Housing is first.
Chris Pavese of Broyhill Asset Management suggests Two Harbor Investment Corp. (NYSE: TWO), an RMBS REIT, as the housing play. RMBS means residential mortgage-backed security. Essentially, it holds all kinds of home mortgages.
The stock price has taken a beating since the Fed announced the imminent demise of its bond-buying program, but Pavese says this is a buying opportunity.
It pays a 12%-plus dividend and according to the CIO of Broyhill has an attractive risk/reward relative to other housing plays.
Or, on a broader scale, you can look at the Vanguard REIT ETF (NYSE: VNQ). It tracks the MSCI US REIT Index, which tracks both commercial and residential mortgage markets but only yields about 3.6%.
But, one of the strongest recommendations in the MarketWatch article came from Greenwich Wealth Management’s CIO. If you are thinking about buying a house, from both a cost and investment perspective, now is the time.
Prices are way down, and actually back to the long-term average for increases, and mortgage rates – even though they moved up recently – are still way below long-term average costs.
My first mortgage was at 13.375%, so no whining about rates at 4% and 4.25%.
As the boomers move on to retirement, and their huge buying power is redirected, it will affect housing and many other sectors.
Be a part of the boomer shift.