Study of Signals

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How to ride that aging baby-boomer wave
(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern(at)aol.com.)
By Linda Stern

WASHINGTON (Reuters) - The baby boomers are starting to turn 60, and who wouldn't want to be selling whatever they're going to buy?

People approaching retirement buy second homes, cruises, investment products, health-care services, the occasional RV or (post) midlife-crisis motorcycle, and lots and lots of restaurant meals.

It seems like investors willing to place a few strategic bets might look at some of those industries. With the members of the boom numbering around 76 million, and entering -- or entrenched in -- their biggest earnings years, there's a lot of money to be spread around.

That is not to say that investors should throw all of their money after this demographic. The key to a successful investment plan is, after all, diversification, low fees and a steady, long-term view.

But boomers will be aging and spending for a long time, and investors who want to spend a bit of time researching the companies and funds that might profit most from that will find a lot to like.

Here are some ideas for getting your piece of it.

-- Leisure.

Boomers love their fun, and fun-selling companies such as lodging and travel businesses, craft stores, publishers, fishing-rod manufacturers and casinos have profits to show for it.

Four leading mutual funds that focus on leisure company stocks have returned 32.4 percent to investors in the six years since the stock market peaked in 2000, says Lipper analyst Don Cassidy. That gain is in comparison to a 0.7 percent loss for the Standard and Poor's 500 over the same period.

The four are Icon Leisure & Consumer Staples (whose symbol is ICLEX), Fidelity Select Leisure (FDLSX), Rydex Leisure (RYLIX), and a load fund: AIM Leisure (FLISX).

He thinks leisure companies will do well for a while. "I like to be in them, in effect, to overweight those areas that the megatrends favor," he said.

-- Financials.

This is another Cassidy favorite. From time to time analysts have looked at the shares of mutual fund companies and determined that they often do better than the mutual funds the companies sell.

Of course, simply buying shares of fund companies will not get you the kind of diversified portfolio you should get from holding a mutual fund.

But with the biggest generation ever entering its investment-obsessed years, and money managers aiming at skimming a minimum of 1 percent off the top of those portfolios, it's worth a look.

Here are some of the companies whose own share prices are beating the heck out of the SP500: Merrill Lynch & Co. (MER), T. Rowe Price (TROW), Raymond James Financial (RJF), Cohen and Steers (CNS), Calamos Asset Management (CLMS), Janus Capital Group (JNS), Legg Mason (LM) and, of course, Ameriprise Financial (AMP), the financial services company behind those embarrassingly annoying (or is it annoyingly embarrassing?) '60s nostalgia ads.

-- Health care.

More than $3 billion in knees and hips are sold every year in America. Increasing numbers of boomers are moving to the aspirin-a-day plan. Diabetes, sleep apnea, hypertension are all at epidemic levels, or at least more carefully monitored, analyzed and treated than they ever were before.

Investing in health care in the face of an aging population seems a no-brainer. And companies that sell health-care supplies, run hospitals and make medical equipment have all been doing very well.

Mutual fund research firm Morningstar picks T. Rowe Price Health Sciences Fund (PRHSX) as the best of the bunch. Another inexpensive fund that has done well in this category is the Schwab Health Care Fund (SWHFX).

Health care companies, says Cassidy, will benefit from the aging trend and all of the new biotech discoveries likely to be brought to market in the next several years.

http://news.yahoo.com/s/nm/20060304/bs_nm/column_investing_dc