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.
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.
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.
The first point is to adhere to the key principles of long-term investing, including developing a diversified portfolio that includes stocks with various styles, sizes, sectors and regions.
To accelerate the retirement investment cycle, you can construct a portfolio designed with more risk - and the potential for higher returns - but it should still be appropriately diversified to protect against larger than average market drawdowns that can be difficult to recover from and ruin any chance to accomplish your early retirement goal. There are numerous ways to diversify a portfolio, and how you do so should depend on your age, your risk tolerance, your growth and income needs, and your long-term goals.
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.
Astute investors pick retirement growth stocks with 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: Equinor (EQNR), Gaming and Leisure Properties (GLPI) and Armada Hoffler Properties (AHH). 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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Armada Hoffler Properties, Inc. (AHH) : Free Stock Analysis Report
Gaming and Leisure Properties, Inc. (GLPI) : Free Stock Analysis Report
Statoil ASA (EQNR) : Free Stock Analysis Report
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