Investments For Early Retirement

Investments for early retirement —8 investment options for early retirees to consider so you can avoid going back to work. I am not a licensed investment advisor and this post is not investment advice.

A lot of people are considering early retirement because of the pandemic.

It’s not only the financial independence community now.

To put it bluntly, people realized life is short and the hybrid work model doesn’t appeal to everyone.

If you are interested in early retirement, either because you realized you don’t want to go back to work, or maybe you don’t like working from home, you have to start considering investments for early retirement.

In this post, I will share an overview of the best investments for early retirement.

Let’s dive in.

8 Investments For Early Retirement

1. Dividend Stocks

As a dividend investor, I am somewhat biased. But it’s my opinion that dividend stocks are the very best investments for early retirement.

Simply put, dividend stocks offer dividend income and capital appreciation.

Depending on how much money you have to invest, you may not even need to worry about the 4% withdrawal rule. Instead, you can live off dividends and keep your capital invested.

Otherwise, dividend stocks are less volatile than growth stocks that do not yet pay a dividend.

For these reasons, dividend stocks can be core investments for an early retirement portfolio.

2. Growth Stocks

If you don’t have a lot of money and are trying to reach early retirement as soon as possible, growth stocks could be the fastest way to get there.

However, growth stocks are not always a sure thing and you have to deal with a lot of volatility.

But if you are skilled enough to select the right growth stocks, they could lead to life-changing wealth in the shortest amount of time.

If you already have a lot of money, you probably should limit the percentage you allocate towards growth stocks. It’s best to focus on preserving capital at this stage. On the other hand, you can afford to take on even more risk with a small percentage of your portfolio.

3. Real Estate

Real estate is clearly an inflation hedge and can be a source of income if rented out.

And even if it’s just your primary dwelling, it’s another asset class that boosts net worth and diversifies a portfolio.

If the mortgage is paid off, it can lower the cost of living as well.

Of course, you don’t want to solely rely on real estate, because you will eventually be forced to sell it or rent it out to make money from it. Otherwise, the boost to net worth is absolutely useless.

But it’s hard to deny real estate as a tangible asset and inflation hedge.

As such, it has to be included as one of the best investments for early retirement.

4. Bonds

According to Ben Graham, the author of The Intelligent Investor, all investors should include a percentage of bonds in their portfolio.

Graham suggested a minimum of 25% bonds and 75% stocks.

Of course, this was before interest rates were as low as they have been over the past decade.

I am sincerely curious as to what Ben Graham would think of the current investment environment.

Nevertheless, bonds can still be a small percentage of an investment portfolio for interest income and to limit risk in stocks.

5. High Yield Savings Accounts

An early retiree must be prepared for emergencies.

As such, they should build up an emergency fund in a high yield savings account.

A high yielding savings account is the perfect way to save for emergencies because the money is instantly accessible.

The downside is that high yield savings accounts do not actually provide a high rate of interest.

Frankly, they are not good options to invest in. But they do provide an extra layer of security for early retirement. So it’s wise to hold a year’s worth of expenses in a high yielding savings account.

6. GICs

Another option, as far as investments for early retirement go, are GICs (guaranteed investment certificates).

Like bonds and high yielding savings account, GICs are best for capital preservation and not as an investment.

In short, investors are not going to get rich quickly by investing in GICs.

In fact, GIC investors are actually losing money due to inflation.

But you can’t put a price on the stability and feeling of safety they offer.

In turn, GICs are worth considering for investors that are looking to preserve capital.

7. Gold

I never thought I’d say this, but Gold actually does appear to offer the best protection for a black swan event.

For example, it’s the best hedge against war or an unexpected event.

I used to think it would be crypto, but crypto is still too volatile and overly correlated with growth stocks.

Personally, I’ve never liked the idea of investing in Gold because it doesn’t produce anything. It doesn’t generate income like a business, it’s just a shiny metal.

However, the last few months have proven Gold’s investment value.

I still wouldn’t invest a lot of money in it. But I can see the value of holding a small percentage of it in a diversified portfolio.

8. Crypto

I’m not going to lie — I was more bullish on crypto over a year ago.

I mean, a small percentage of my portfolio is still invested in Bitcoin (BTC) and Ethereum (ETH).

However, it seems too correlated with growth stocks to truly be considered a safe haven.

Originally, I looked at Bitcoin as an alternative to Gold. But since the recent world events began, crypto has not been the safe haven I thought it was.

With that said, crypto is still a revolutionary technology that is still worth owning in some capacity.

It’s one of the investments for early retirement that has a chance to provide life-changing wealth.

But similar to how the tech stock bubble of 2000-2002 burst, my guess is that a lot of the shitcoins will disappear. Hence why I only own Bitcoin and Ethereum.

Related: Should You Invest In Bitcoin?