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I think I can retire early by following this strategy

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We all dream of being able to retire early, and now is the time to start taking action. Indeed, I believe it’s possible to retire early by following a simple savings and investment strategy. Today I’m going to explain how. 

A strategy to retire early

The best way to build a sizeable financial nest-egg is to invest money for the future. There are many strategies available for investors to follow to meet early retirement goals. 

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However, some of these are quite complicated, and more often than not, they require more time and effort than they are worth. As such, they could hold back any plans to retire early. 

The most straightforward strategy by far is, in my opinion, to buy a diversified basket of blue-chip stocks. The slow and steady nature of blue-chip stocks means that investors can concentrate on their day-to-day jobs. These larger businesses are also less likely to run into financial problems than their smaller peers. 

There are two ways investors can follow this strategy. Either selecting stocks themselves or buying a low-cost index tracker fund. The latter approach could be ideal for investors who don’t have much time and just want a set-and-forget programme. Most online stockbrokers now offer a regular investment plan starting from as little as £25 a month.

This is one of the easiest ways to build enough savings to retire early. All investors need to do is select the fund they want to buy, set up a direct debit and leave the rest to the broker and the market. 

Investors seeking a more hands-on approach can buy individual stocks. I’d stick with high-quality blue-chip stocks that have large profit margins and strong balance sheets. Some examples include Hargreaves Lansdown and Coca-Cola HBC. Both of these businesses have robust competitive advantages and a strong track record of producing large returns for investors.

Growing the pot 

By following the strategy above, I think it would be straightforward to build a financial nest egg large enough to retire early. 

You see, over the past three decades, UK blue-chip stocks have produced an average total return of around 10% per annum for investors. According to my calculations, at this rate of return, an investment of £500 a month could grow to be worth around £600k within 25 years. This could be enough to provide an annual income of around £20,000 or potentially more. Investors who decide to retire early might have to save more or spend less to meet their financial goals. 

These are really only rough figures. However, I think they show clearly the straightforward strategy investors like me can use to retire early. By following the same template, anyone could build a sizeable financial nest egg, which could either be used for retirement, to provide a passive income or savings for a rainy day. The combination of a regular monthly investment and blue-chip stocks can be incredibly powerful for investors who want to build wealth in the long term. 

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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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