Powerful Proof Anyone Can Invest for an Early Retirement - February 20, 2020

Zacks Equity Research

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.

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.

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.

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 routinely recognizes lower risk growth retirement portfolio picks, and here are a few that may be worth considering: Heritage Commerce (HTBK), Lockheed Martin (LMT) and Merck (MRK). 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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Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
 
Heritage Commerce Corp (HTBK) : Free Stock Analysis Report
 
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