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Forget gold, Cash ISAs and buy-to-let! I’d buy FTSE 100 dividend shares to retire early

The FTSE 100’s recent decline is likely to dissuade many investors from buying shares. After all, it has fallen by over 20% from its recent peak and could experience further challenges as risks such as coronavirus and an oil price war continue.

However, assets such as gold, buy-to-let and Cash ISAs may not offer the same level of return as FTSE 100 shares in the long run. As such, in terms of long-term retirement planning, now may be the right time to buy a diverse range of large-cap shares. They could help you to retire early.

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Recovery potential

One of the core aims of most investors is to buy when the stock market is low, and sell when it is high (although at The Motley Fool we also like to hold for the long term). While that sounds easy in theory, in practice it is much more challenging. A key reason for this is that for stock markets to be priced at a low level, there usually needs to be a significant amount of risk, fear and uncertainty ahead in the short run. This often causes investors to adopt a cautious approach to shares, and instead purchase other assets.

However, investors who are able to look beyond those challenges and instead focus on the long-term prospects for the FTSE 100 can capitalise on low valuations. Although they may not experience large levels of profit in the near term, this is unlikely to be a major concern if they have a time horizon of many years until they retire.

Furthermore, the FTSE 100 has a strong track record of recovering from its various downturns and bear markets. Among the worst of them was the 1987 crash, which included the largest one-day fall in the FTSE 100 of over 12%. Since then, though, the index has delivered high returns and helped many investors to retire early.

Relative appeal

Assets such as gold, Cash ISAs and buy-to-let properties may seem appealing at the present time. However, gold is trading at a seven-year high. This suggests that it may not offer good value for money.

Likewise, house prices in the UK are close to record highs when compared to average incomes. This may mean there are affordability issues ahead should interest rates rise in the coming years. And with the returns on Cash ISAs being less than inflation in many cases, they may fail to provide a boost to your retirement prospects.

As such, buying cheap FTSE 100 dividend shares could prove to be a shrewd move. They appear to offer excellent value for money in many cases, while their dividends could provide a boost to their total returns in the long run. Ultimately, there may be further uncertainty ahead that leads to paper losses for investors. But over the long run, buying cheap shares could positively impact on your retirement prospects.

5 steps that can help you to stay calm and invest on – whenever stock markets panic…

It’s ugly out there…

The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.

And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.

Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)

Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…

Download a FREE copy of our Bear Market Survival Guide today and discover the five steps you can take right now to try and bolster your portfolio… including how you can even aim to turn today’s market uncertainty to your advantage.

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Peter Stephens has no position in any of the shares mentioned. 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.