Retirement can appear a good distance off for many individuals. A financially savvy employee can flip that long-term timeframe to their benefit and begin investing sooner slightly than later to assist fund their retirement.

For instance, if a 40-year-old began as we speak by investing £100 every week in fastidiously chosen blue-chip shares, I reckon they might develop their wealth and doubtlessly retire early.

Common saving might help construct a sizeable retirement fund

After all, beginning at 30 can be even higher than beginning at 40 – and at 20 can be even higher than at 30!

Sadly, although, many people don’t realise that (or produce other spending priorities) till it’s too late. Even at 40, thankfully, an investor may nonetheless make an enormous distinction to their retirement fund if they begin investing instantly.

Placing £100 per week right into a Shares and Shares ISA or SIPP and compounding it at 10% yearly, after 25 years the investor can have a retirement fund of near £535k.

That would assist them draw an earnings (for instance, by way of dividends) and retire sooner than in any other case.

Constructing a high quality portfolio of nice shares

A aim of 10% won’t sound too difficult. In any case, FTSE 100 insurer Phoenix Group (LSE: PHNX) at the moment affords a dividend yield of 10.2% and has been a constant dividend raiser in recent times. Another blue-chip shares additionally provide excessive yields.

However there are a number of issues to remember. That compound annual progress fee consists of good years in addition to unhealthy. It additionally consists of capital acquire (or loss), in addition to dividends.

Phoenix has a beneficiant dividend yield, however its share price has fallen 11% previously 5 years.

On prime of that, it’s all the time essential to diversify throughout completely different shares in case certainly one of them disappoints. Over the many years between age 40 and retirement, that’s more likely to occur than it might appear to an investor once they first begin investing!

However with the best strategy and investing mindset, I feel a ten% compound annual progress fee could possibly be achievable.

One share to contemplate

In reality, I do nonetheless suppose Phoenix is a share to contemplate for its long-term potential.

The insurance coverage market is huge and is unlikely to get a lot smaller any time quickly, I reckon. With round 12m prospects and near £300bn, Phoenix has an enormous enterprise that has confirmed capable of generate giant quantities of spare money. That’s useful in relation to funding these chunky dividends.

There are dangers with all shares, together with Phoenix. For instance, it has a e-book of mortgages that embody sure valuation assumptions. If a property market stoop noticed costs fall far sufficient, these assumptions may develop into insufficient, that means Phoenix could must revalue the e-book, hurting income.

From a long-term perspective, although, I feel the confirmed enterprise continues to have sturdy potential.