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How you can retire early by investing just £5 a day in the best UK shares

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Many of the best UK shares are expected to deliver disappointing growth rates in the current year. The global economic downturn has caused trading conditions for many businesses to deteriorate significantly versus previous expectations.

However, strong businesses are likely to survive a period of economic weakness. They are also likely to experience rising profitability as the economic outlook improves. As such, buying them regularly, with as little as £5 per day, could produce high returns that enable you to retire early.

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The best UK shares can recover as the economic outlook improves

The best UK shares may have a higher chance of not only overcoming short-term risks, but of enjoying strong profit growth in the coming years. For example, they may have lower debts than their peers, or a unique product that enables them to outperform their sector rivals. This may allow them to generate relatively high levels of profit in the long run.

Although their operating conditions may remain weak in the coming months, as unemployment rises and GDP growth deteriorates, their long-term futures could be relatively bright. The world economy has never experienced a permanent recession, and has always recovered from the various challenges it has faced. With vast amounts of government and central bank stimulus, this process may happen sooner and to a greater extent than current stock market valuations suggest.

Therefore, investing money in UK shares could be a means of benefitting from a likely return to economic growth. As economic conditions improve, profitability and investor sentiment may do likewise. This could return many companies to previous share price highs, and have a positive impact on your portfolio’s prospects.

Investing small amounts often can lead to a large nest egg

Investing small amounts regularly in the best UK shares is a great starting point for anyone seeking to retire early. The cost of regular investment services can be as little as £1.50 per trade, which makes it accessible to almost all investors.

For example, investing £5 per day (or around £152 per month) over a 30-year time period could lead to a portfolio valued at £228,000, assuming an 8% annual return. While an 8% return may sound generous to some investors after the recent market crash, it is in line with the annualised return that has been recorded by the stock market over recent decades.

Clearly, by investing larger amounts for longer in the best UK shares, you could build an even larger portfolio by the time you retire. However, the example shows that the stock market’s long-term growth prospects have the potential to improve your financial outlook. They could even help you to retire early as you benefit from a likely improvement in the economy’s performance that boosts profitability and investor sentiment after a challenging 2020.

A Top Share with Enormous Growth Potential

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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.

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