In 1960, 13% of all U.S. households were made up of one person. That number has risen to 28%. Companies and industries are taking note. Is your portfolio prepared?
When we think of the typical American consumer, we often think about someone who’s part of a family. Our thoughts drift toward the “regular” middle-class family with two parents and two kids.
That image, however, is changing. The United States is undergoing something of a demographic shift. The U.S. Census Bureau reports that 28% of households now comprise people living alone. That represents an increase from when singles made up just 13% of households in 1960.
More than 35 million consumers live alone. That represents a shift in how companies and industries think about their products and their marketing. If you pay attention to such trends, there might be a way to capitalize on this demographic shift in your portfolio.
“Many companies recognize that traditional products might not be attractive to the younger, and growing, demographic of singles,” said Todd Tresidder, a former hedge fund manager and the founder of the financial education website Financial Mentor. “Companies that adapt to this new reality are more likely to have staying power and could potentially add value to your portfolio.”
Tresidder pointed out that many single millennials and up-and-coming members of Generation Z are seeking solutions that look different from those favored by previous generations. For example, he noted that millennials are more likely to rent items than to buy. This goes beyond housing.
“Millennials like streaming services for their entertainment,” Tresidder said. “They aren’t necessarily buying DVDs and Blu-Rays. Instead, they’re paying for Netflix (NFLX), Amazon Prime (AMZN), and HBO Go (now part of AT&T). Plus, they aren’t as interested in getting cable and satellite packages. They use streaming to create an à la carte experience that focuses on their entertainment needs.”
Younger generations are renting clothing from companies like Rent the Runway and being styled with Stitch Fix (SFIX). They can even rent furniture from startups like Fernish. Although startups and emerging companies might not necessarily be right for your portfolio (and some, such as Rent the Runway and Fernish, are privately held), you might consider more established companies that are adapting to the single lifestyle.
General Mills (GIS) brand Betty Crocker, for example, is pushing out single-serving desserts that can be made in a mug and microwaved. It’s simple—and singles don’t end up with an 8x8 pan of brownies that they’ll never finish. Some appliance makers are shrinking the sizes of their ovens and refrigerators to better serve the singles demographic.
Another millennial trend is solo travel, with 58% of millennials reporting that they’re willing to travel alone. In fact, booking platform Klook rates solo travel as the number one travel industry trend for 2019.
Tresidder pointed out that you have to be careful with trends like this.
“The company that’s doing great today thanks to a trend could tank tomorrow if the trend changes,” Tresidder said. “Although you can certainly make adjustments to your portfolio and look for companies likely to benefit from the growing number of single households, you also have to be careful not to pin your future on it.”
Rather than focusing on individual companies, Tresidder suggested looking at industries as a whole that are likely to benefit from the rise of singles. Singles are likely having an impact on the economy, but it’s important to note that catering to singles, although it may add to a company’s bottom line, is only a part of the equation.
“There are still plenty of fundamentals you should be looking at before you invest in any company or fund,” Tresidder cautioned. “Whether a company is sensitive to the singles demographic shouldn’t make or break your investment decision.”
It’s also possible to look at potential changes to the way the American economy works in the future. Sometimes it’s not about adding a specific investment to your portfolio but about shoring it up in case of economic upheaval and changes.
“Today’s singles, especially millennials and older members of Gen Z, are changing the overall landscape of the economy,” Tresidder said. “They’re buying homes at lower rates and even driving less, preferring to use public transit and rideshare.”
With singles more likely to be urban and upscale, there’s plenty of money there, and their focus on renting, reducing car ownership, and prioritizing experiences instead of acquiring things could change the way consumption works in the future economy.
“Rather than trying to figure out which companies and industries are going to benefit from the shifting demographic, think about how the changing economy could impact your portfolio,” suggested Tresidder. “Consider talking with an investment professional about various strategies that can help protect your portfolio from volatility and economic upheavals.”
Younger generations are taking a different view of what makes a household—and of consumerism in general—than previous generations. Companies that identify the trend and adapt, as well as industries that grow up to cater to the new reality, may be positioned to succeed.
But that doesn’t mean that you should go out and change the way you manage your portfolio based on the singles demographic. Instead, consider how certain companies might help you tweak some of your returns, maintain diversity and risk appropriate to your individual circumstances, and explore overall portfolio strategies designed to help you weather the coming changes to the economy.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
All investments involve risk, including loss of principal. Past performance does not guarantee future results. There is no assurance that the investment process will consistently lead to successful investing.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2019 TD Ameritrade.