The Affordable Care Act (ACA) has insurance companies, medical businesses, health-care providers, employers, and individuals scrambling to process new information relating to our changed health care system. But that doesn’t mean you should overlook the health care industry as an investment.
The case for health care as a potentially profitable investment relates to our aging population. According to 2010 U.S. Census figures, there were more people 65 years and over in 2010 than in any previous sampling. In fact, between 2000 and 2010, the population aged 65 years and older increased at a significantly faster rate (15.1 percent) than the general U.S. population (9.7 percent). According to the latest figures, the 40 million Americans over the age of 65 comprise around 13 percent of the U.S. population.
A growing population segment
The Administration on Aging (AOA) projects that this group will more than double in the next 36 years, reaching 88 million by 2050. That means that we can expect consistent demand for health-care products and services. Indeed, according to the Centers for Medicare & Medicaid Services (formerly the Health Care Financing Administration), health-care spending is expected to increase at an average rate of 5.8 percent between 2012 and 2022, one percent above the projected average annual growth in the gross domestic product.
An investment opportunity?
The aging of the population and its need for health care has fueled growth among health-care companies, which include medical-device manufacturers, pharmaceutical producers, and home-health-care services, to name just a few. As a result, now might be a good time to look into adding health-care exposure to your portfolio.
Before jumping in, however, you should understand the risks and rewards of investing in this sector, especially at this tumultuous time in the sector’s history. Your financial advisor can help you determine if health-care investments are right for you based on your individual financial circumstances and goals.