Australia: Ten best investment ideas 2014 - Have a process to guide you allowing you to focus on what matters to you

Last Updated: 14 March 2014

In the post war era of 1946 to 1961 Australia underwent a population boom that is widely known as the "baby boomer" era. Now some 50 to 60 years later, Australia is about to undergo a structural shift as this generation enters a stage of life that allows them to enjoy the fruits of their labour. For some, this will be a switch from working to enjoying retirement. Others will toil for longer in the workplace, but likely seek flexible work environments to allow for additional recreation time.

Australia will now see a larger number of people entering the retirement age, currently 65, on an annual basis than any time in history. This comes with a number of challenges, none less than financial. This is demonstrated by the population pyramid (Figure 4 below) that displays the increasing number of people approaching retirement age in the years ahead. This transition is an important consideration from the perspective of both potential retirees and also investors.

This shift is now likely to be hastened due the recent favourable investment market conditions. Some baby boomers that were planning on retiring in 2008 or 2009 delayed their transition as the Global Financial Crisis severely affected superannuation savings and overall consumer confidence.

As the global economy slowly recovers, equity markets have rallied to the point where most superannuation savings have returned, or recovered beyond pre-crisis levels. The performance of the S&P/ASX 200 Accumulation Index now exceeds the previous peaks of 2007 (see Figure 7 later). This index includes the affects of share prices and dividends that are assumed to be reinvested back into the market. This is a fair representation of superannuation savings for a person still in accumulation phase who has a more growth oriented investment strategy.

The situation now posed to potential retirees is that their retirement savings have rebounded, however they have worked for up to 6 years longer than desired. For some the question of "am I now in a position financially to retire?" may be asked.

We believe given the market recoveries, that those who were ready to consider retiring, can now make that significant life decision. This is clearly not a decision to be taken lightly and with the changing attitudes towards retirement this can be difficult decision for some. Considering an external voice for advice is certainly worthwhile if there are still question marks in relation to that decision.

We also see a marked change in the attitude to spending and areas of major expenditure between those now considering retirement relative to previous generations. As we live increasingly longer and healthier lives, the requirements for a high standard of living after work have increased. Previous generations had very conservative views on retirement where saving and frugal mindsets were front of mind and a legacy for their children was a given. The attitudes of forthcoming retirees are markedly different.

Retirement, for some, is viewed as a time for indulgence, a time for enjoying the fruits of one's labour and for new experiences. An interesting question to pose is: "how do you foresee your retirement relative to your parents?" We expect that the answer is generally more indulgent and fruitful.

The latest generation of retirees is characterised by financial and technological proficiency with higher levels of consumption of more luxurious pursuits. Baby boomers are spending more money on travel, housing, technology and healthcare that were previously thought to be excessive or indulgent for retirees. The best example is the rapid takeup of new technology by a generation previously thought to be too inexperienced for smart phones and tablets; this has been one of the fastest growth demographics in fact. Attitudes towards retirement lifestyles is a key consideration for superannuation accumulators and given current market conditions now is the time to be considering these options and whether you're ready to change your life.

While these are important considerations for people approaching retirement, investors should also be aware of potential investment opportunities aligned with these demographic shifts. The most obvious of these is the health-care sector. As an increasing number of retirees live longer and healthier lives, health and aged care services become a vital service.

Hospital, medical diagnostics and testing, and vaccine and other medical solutions are some of the variety of opportunities.

Other market sectors poised to take advantage of this trend are travel and technology. Regular travel has now become a major component of retirement and there are numerous quality companies that can take advantage of this trend. For example, Sydney Airport is forecasting consistently increasing passenger numbers due to the increasing wealth of retirees and the expansion in Asian tourists. Combined with a strong currency and preferences for overseas travel, large airport infrastructure assets provide an attractive proposition.

This thematic is also blended with rapid take up of technology as numerous travel companies offer online systems where holidays can be planned, booked and purchased completely online. The adoption of mobile technology continues at pace and needs a strong support network to keep up with the rate of change. The providers of telecommunications technology are seeing rapid growth in older generations, but also a changing mix of demand (who wants a phone on the wall these days!). Telstra (TLS) is the obvious investment set to benefit in this sector however there are several smaller telecommunications providers set to benefit as the focus shifts from traditional fixed line voice services to wireless data centered solutions and cloud services and technologies. Security, capacity, scale and location should also be considered in relation to cloud computing.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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