The concept of retiring early appeals to many individuals. Whether or not it’s financially attainable nevertheless, can typically be a really totally different query as to whether it sounds enticing.

As a substitute of working myself, what if I may put my ft up and profit from the arduous work of workers at FTSE 100 corporations like Vodafone and BP?

The reply is, I may. However how? My strategy could be to construct up passive earnings streams by way of a diversified portfolio of high-quality blue-chip shares.

Let me dig into the small print of how which may work in observe.

Shopping for particular person shares, not the index

The FTSE 100 index at present affords a median yield of three.6%. One possibility could be merely shopping for into an index tracker.

However that might expose me to some shares I don’t need to purchase in any respect and others I feel are overvalued. As a substitute, I’d construct my very own portfolio of particular person shares. That would additionally let me earn a yield effectively over 3.6% whereas sticking to giant, profitable corporations.

Within the present market I feel a 7% yield, although effectively above the FTSE 100 common, ought to be achievable.

How I may goal to retire early

How a lot passive earnings that generates will depend upon what I make investments. That may fluctuate for every individual. If I needed to focus on £20,000 yearly to retire early, for instance, I may hit that by investing £286,000.

A special strategy to the identical goal may very well be to begin placing away £1,000 a month. Compounding that at 7% yearly, I must have a £286,000 portfolio in underneath 15 years. I may then use that to generate passive earnings.

That stated, dividends are by no means assured. So personally, I’d need to construct in a margin of security between my projected monetary wants and passive earnings. At a decrease common yield, I would wish to speculate extra to realize the identical passive earnings as within the illustration above.

Discovering the appropriate shares to purchase

What kind of FTSE 100 shares may assist me obtain my goal? One that might is Phoenix (LSE: PHNX). I don’t personal this however could be glad to purchase it if I had spare money to speculate.

The corporate isn’t a family title however a few of its working models are. Mainly, it owns plenty of giant insurers, so has a buyer base of round 12m. In reality, it’s the nation’s largest long-term financial savings and retirement enterprise, administering some £283bn of belongings.        

That may be a profitable enterprise. Phoenix has grown its dividend yearly lately and goals to maintain doing so. The 9.4% dividend yield is definitely enticing to me.

One danger to these payouts persevering with at their present stage is a extreme property market downturn. If that occurred, the worth of Phoenix’s mortgage e book may very well be negatively affected, consuming into earnings.

However that’s exactly why I don’t plan to place all my eggs into one basket. I reckon a diversified basket of carefully-chosen FTSE 100 shares may provide me rewarding and, hopefully, pretty resilient passive earnings streams!