Building sufficient financial resources to retire early may sound like a dream, but making that dream come true is not as hard as it may sound. The main thing is simply to save more money each month. No big deal, right? Well ...
Usually, advisors advise 15% to 20% of total income saved every month as an objective - yet in the event that you want to retire earlier, you likely need to tighten that number up to 40% or half of your pay. Not a discipline easily practiced when you review or consider that a substantial segment of your paycheck goes to basic, non- negotiable lifestyle needs. But if you are willing to make some serious lifestyle adjustments and trade-offs, it's achievable.
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.
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.
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'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: Preferred Apartment Communities (APTS), EPR Properties (EPR) and American Eagle Outfitters (AEO). 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.
Do You Know the Top 9 Retirement Investing Mistakes?
Whether you're planning to retire early or not, don't let investing mistakes derail your plans.
If you have $500,000 or more to invest and want to learn more, click the link to download our free report, 9 Retirement Mistakes that will Ruin Your Retirement.
This report will help you steer clear of the most common mistakes, like trying to time the market, lack of diversification in your portfolio, and many more. Get Your FREE Guide Now
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
EPR Properties (EPR) : Free Stock Analysis Report
Preferred Apartment Communities, Inc. (APTS) : Free Stock Analysis Report
To read this article on Zacks.com click here.