Powerful Proof Anyone Can Invest for an Early Retirement - July 20, 2020
Accomplishing the financial cushion to retire early is a fantasy for most. Bringing the fantasy to reality is not as difficult as it sounds. The key is straightforward: Save significantly more every month. Sounds simple, correct? One moment.
The typical rule of thumb given by financial planners is to have a goal of saving up to 20% of total earnings. But if you want to retire when you're younger, that percentage will probably need to be more like 40% to 50% of your income. Of course, that's not so simple since a big part of your paycheck goes to day-to-day, necessary expenses. So if you want to save that much, you need to make some serious lifestyle adjustments. It requires making changes, but it's doable.
This concept of intensive saving for an early retirement has spawned a movement called FIRE (Financial Independence, Retire Early). Followers of FIRE strive to save up to three-quarters of their income, and make other adjustments too: live in small homes, walk to work each day, practice strict diet plans, and more. Even if this lifestyle may sound a bit unreasonable, the ideas behind it are worth considering.
To start, stick with the essentials of long-term growth investing: Build a diversified portfolio of stocks with exposure to various styles, sizes, sectors, and regions.
You may be able to accelerate your potential retirement earnings by consciously seeking higher returns (and also accepting more risk) in your investment portfolio. But whatever your risk tolerance, your portfolio must be diversified to protect against extreme market movements that could jeopardize your early retirement objective. You can choose from a number of ways to allocate investments to diversify your portfolio, and these should be informed by your individual goals, growth and income needs, appetite for risk, and age.
Once you have accelerated your savings and put an ongoing plan in place, invest your savings into your portfolio as soon as possible. Don't try to time the market. Leave your portfolio alone, and let the compounding nature of the markets do its magic to help grow your retirement nest egg exponentially over time.
Growth stocks with low beta, strong earnings estimates, positive sales growth, and expected future growth are an excellent way to determine investable growth stocks for your retirement.
The Zacks Rank routinely recognizes lower risk growth retirement portfolio picks, and here are a few that may be worth considering: Bristol Myers Squibb (BMY), Amgen (AMGN) and AbbVie (ABBV). These growth stocks have strong Zacks Ranks and a beta of 1 or lower, with earnings and sales growth of at least 5% over the past 5 years.
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AbbVie Inc. (ABBV): Free Stock Analysis Report
Bristol Myers Squibb Company (BMY): Free Stock Analysis Report
Amgen Inc. (AMGN): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.