While the rise of Bitcoin and the long track record of profitability in buy-to-let properties may make them appear to be worthwhile investments, they carry significant risks.
Bitcoin’s lack of fundamentals means it may be grossly overvalued at the present time. Meanwhile, the amount of leverage that many buy-to-let investors currently have may mean that their profitability is squeezed when interest rates finally rise.
As such, buying a diverse range of FTSE 100 stocks could be a better means of improving your retirement prospects. Not only do they offer lower risks than Bitcoin and buy-to-let properties, they could also offer high returns in the long run.
With that in mind, here are two FTSE 100 stocks that appear to offer favourable total return prospects.
Housebuilders such as Persimmon (LSE: PSN) could offer long-term capital growth potential, despite there being potential risks ahead. The company has reported continued strong demand for its new homes, while its strategy of focusing on improving customer service levels may lead to a more sustainable long-term growth rate.
Of course, risks such as a change in government policy and weak consumer sentiment may mean that the stock continues to trade at a discount to its intrinsic value over the coming months. However, since it offers a dividend yield of 12.4% in the current year and a price-to-earnings (P/E) ratio of just 7, it seems to offer a favourable mix of income and value investing potential.
Therefore, investors who are able to look beyond the near-term risks facing the UK economy may be rewarded through an investment in Persimmon. The company’s balance sheet and strategy may allow it to produce FTSE 100-beating returns that improve your retirement prospects.
Another property-related stock that could help you retire early is warehouse operator Segro (LSE: SGRO). It could benefit from the continued rise in demand for large warehouses across the UK, with growing sales in the e-commerce sector likely to lead to a tailwind for the business.
This could allow the stock to post continued earnings growth which enables it to raise dividends over the medium term. Although it currently has a dividend yield of just 2.4%, shareholder payouts have risen at an annualised rate of 6.5% over the last three years. This suggests that its future dividend growth rate could be relatively appealing.
Since Segro trades on a price-to-book (P/B) ratio of just 1.2, it seems to offer a wide margin of safety at the present time. Certainly, the commercial property sector may prove to be a volatile investment in the short run. But with a continued shift towards online retailing, the business could enjoy improving operating conditions over the coming years. This may produce capital growth that helps you to build a nest egg in order to retire early.
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Peter Stephens owns shares of Persimmon. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.