Achieving the financial freedom to retire early a dream for most. Making that dream a reality isn't as tricky as it sounds. The secret is simple: Save a lot more each month. Sounds easy, right? Not so fast.
Typically, advisors peg 15% to 20% of total income saved each month as a goal - but if you want to retire earlier, you probably have to ratchet that number up to 40% or 50% of your income. Not a feat easily accomplished when you review your take into account that a good portion of your paycheck goes to essential, non-negotiable lifestyle items. However, if you are willing to make some serious lifestyle changes and sacrifices, it's possible.
A generally new development called Financial Independence, Retire Early (FIRE) has been created around this "sacrifice and over-save now to retire early" idea. FIRE supporters create exacting savings plans (up to 75% of income) and make related compromises like living in small homes, walking to work every day, prohibitive weight control plans, etc. This way might be unreasonably prohibitive for many, yet the mentality offers a few takeaways that may merit consideration.
First, stick with the fundamentals of long-term growth investing: Choose a diversified portfolio of stocks with exposure to different styles, sizes, sectors, and regions.
To speed up the retirement investment cycle, you can build a portfolio structured with more risk - and the potential for higher returns. It should in any case be adequately diversified to safeguard against sharper than normal market downturns that can be hard to recuperate from and that can ruin any opportunity to achieve your early retirement goal. There are various strategies to diversify a portfolio, and how you do so should be guided by your age, your risk appetite, your growth and income needs, and your long-term objectives.
Once you've begun saving at a higher rate and you have an investment plan, put that money to work in your plan as quickly as you can. Don't worry about finding the "perfect time" to invest - simply put the money in and keep it in. Let compounding work to help you grow your retirement savings at an exponential rate.
You may want to look at growth stocks with attributes acceptable for retirement investing like low beta, strong earnings estimates, positive sales growth, and expected future growth.
The Zacks Rank regularly identifies attractive growth stocks ideal for retirement investing. Here are just a few that might be worth consideration: AT&T (T), Southwest Gas (SWX) and CVS Health (CVS). These are top-ranked stocks, with at least 5% earnings and sales growth over the past five years, and boast beta equal to or lower than 1.
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CVS Health Corporation (CVS): Free Stock Analysis Report
Southwest Gas Corporation (SWX): Free Stock Analysis Report
AT&T Inc. (T): Free Stock Analysis Report
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