Investing in the Aging Population: A Look at Bonds and Pharma ETFs

What does an aging population mean for investors?

An aging population will likely reshape the investment world. 

When we think about our own demand for certain investments, our preferences undoubtedly changes throughout life. While we are young, we are more risk tolerant as we have a longer runway to grow our capital should we suffer losses in our investments. However, as we get closer to retirement, we don’t have that same runway anymore; thus, people become significantly more risk averse as they age. This means that fixed income investments will likely see increased demand as populations age.

Turning to stocks, there are certain companies that can benefit from aging populations. Older folks generally require greater expenditures on health care. The overall demand and dollar expenditures on health services should increase alongside aging populations. Investors can benefit by investing in pharmaceutical and biotech companies.

ETFs to play an aging population

As the global population ages, there are two investment areas well placed to benefit: (1) overall fixed income as an asset class, and; (2) healthcare (specifically pharmaceuticals and biotech).

On the bond side:

Vanguard Total International Bond ETF (BNDX)

Aging is an international trend. To play the increase in international bonds, BNDX holds various treasury-related bond securities in developed countries; with the largest holdings in France (3.7%), Spain (2.9%), Germany (2.7%), UK Gilts (2%), and Korea (2%).

• AUM: $48 billion
• 1mo Performance: +2.38%
• 1Mo Flows: +$150 million

On the healthcare side:

VanEck Pharmaceutical ETF (PPH)

The largest and most liquid Pharmaceutical ETF is PPH. This ETF tracks the largest pharmaceutical companies globally, with a tilt toward US companies. Largest holdings include Johnson & Johnson (8.3%), Abbvie (5.5%), and Eli Lilly (5.5%).

• AUM: $369 million
• 1mo Performance: -2.72%
• 1Mo Flows: -$45 million

iShares Biotechnology ETF (IBB)

Biotech companies generally carry more upside potential than pharmaceutical companies at the expense of greater risk and volatility. IBB is a core ETF holding for those looking for US biotech exposure. Largest holdings include Gilead Sciences (8.1%), Amgen (7.6%), and Vertex (7.1%).

• AUM: $7.95 billion
• 1mo Performance: -2.42%
• 1Mo Flows: -$90 million

Data as of March 24, 2023.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.