9 Best Stocks to Invest in the Aging Population

One of the world’s most precious and sought-after resources will soon be in short supply. No, not gold, oil or even water—we’re talking about youth. A new report from Bank of America Merrill Lynch says the world is hurtling toward “peak youth.” That means that by the end of this decade, people 65 and older will outnumber children younger than 5 for the first time in human history. As birth rates fall, life expectancies worldwide are increasing by one year every five years, and will reach an average of 77 years by 2050, up from 48 in 1950. In 2050, 2.1 billion people will be 60 or older, more than double 2015’s count.

The massive demographic shift is fraught with risk for governments, companies and private citizens scrambling to prepare for the challenges of our increasing longevity. But the shift also presents a huge opportunity for people who adjust their saving strategies and zero in on investments that will thrive in the silver economy. “At every age, people need to be thinking about their future—and that future could be a lot longer than many people are thinking,” says Tracie McMillion, chief global asset allocation strategist at Wells Fargo Investment Institute.

For starters, retirees must look beyond bonds, says McMillion. A healthy dose of dividend-paying stocks will provide the growth that a decades-long retirement requires. Find them in Vanguard Dividend Growth (symbol VDIGX), a member of the Kiplinger 25. For the bonds you do hold, consider longer maturities. Debt that matures in 20 or 30 years will be in demand as fund managers try to match pensioners’ longer life spans. Younger savers should fund health savings accounts, which permit holders to accumulate assets over a lifetime—an attractive option considering that the average 85-year-old in the U.S. spends nearly $35,000 a year on health care.

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An aging population has its drawbacks, but the stocks of companies catering to seniors represent a multi-trillion-dollar silver lining, says BofA Merrill Lynch strategist Beijia Ma. “Financial-services com­panies have the potential to fill a massive void,” she says. The 50-plus age group holds 52% of global wealth, but only one in four retirees has used a professional adviser. And the onus on individuals is increasing, with personal savings expected to account for 32% of retirement assets for millennials, compared with just 15% for those born in the 1920s and 1930s. Stocks that could benefit: brokerage firm Morgan Stanley (MS) and insurer Principal Financial Group (PFG).

Or ride the age wave with health care firms. Some 80% of people 65 and older have a chronic health condition. Innovative companies in search of cures for cancer or dementia will prosper, and managed-care companies will become increasingly important. Check out biotech giant Celgene (CELG) and United Health Group (UNH).

Home is where more than the heart is. Seniors account for nearly half of home-renovation spending, and 87% of baby boomers want to age in place—good news for Lowe’s (LOW) and Home Depot (HD). Also consider Ventas (VTR), a real estate investment trust with 787 senior housing properties in its portfolio. With consumers age 60 and older expected to spend $15 trillion in 2020, it’ll pay to follow the silver dollar. Seniors are spending it on travel and on fighting the signs of aging, to the benefit of cruise operator Carnival (CCL) and Botox maker Allergan (AGN).