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 ...
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.
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.
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.
After accelerating your savings and setting up an ongoing plan, invest your savings into your portfolio at the earliest opportunity. Try not to attempt to time the market. Stay put, and let the compounding characteristics of the markets do its work to help grow your retirement wealth exponentially over time.
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.
Zacks offers investors useful rankings for lower risk growth stocks for retirement portfolios. The following are a few selections that merit a closer look: American Eagle Outfitters (AEO), Preferred Apartment Communities (APTS) and EPR Properties (EPR). Earnings and revenue has seen growth of at least 5% or higher over the last five years, with a beta of 1 or lower.
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EPR Properties (EPR) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Preferred Apartment Communities, Inc. (APTS) : Free Stock Analysis Report
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