U.S. Residents Typically Retire at 62. Investing in These Three Shares Now Might Amplify Your Retirement Income's Ease.
Looking to retire early and comfortably? The average American calls it quits at 62, which is younger than the Social Security full retirement age of 66 or 67. But it's not impossible to achieve this with the right investment strategy.
One key is buying and holding the right stocks to produce enough growth in a relatively short period. Three stocks that could help you achieve an early retirement are PepsiCo, Amazon, and Wolfspeed.
PepsiCo (PEP)
At first glance, PepsiCo may not seem like a must-have investment. The beverage industry isn't a high-growth one, and PepsiCo isn't even the biggest name in the business. But dig deeper, and you'll find a better-kept secret.
PepsiCo differs from its rival, The Coca-Cola Company, by owning the bulk of its own bottling operations and production facilities. This gives the company tighter control, reduces net operating costs, and brings more consistent earnings and earnings growth.
Over the past 30 years, if you reinvested all the dividends both PepsiCo and Coca-Cola paid, you would have been better rewarded with PepsiCo shares. The company has also implemented a more aggressive stock buyback program, accelerating per-share profit and dividend growth.
PepsiCo's dividend has been raised every year for the past 52 years, making it unlikely that this streak will end anytime soon, given the strength of the company's brand names.
Amazon (AMZN)
Amazon is such a commonly suggested stock pick that it's almost become cliche. Don't dismiss it just because everyone seems to own it, though. Amazon Web Services (AWS) has long accounted for around 17% of the company's current revenue and produces roughly 60% of its operating income. With its cloud computing services industry expected to grow at an average annualized pace of 22% through 2030, it's hard to ignore the potential growth of Amazon.
In the meantime, Amazon is also turning an increasing profit in online shopping, making its e-commerce operations more profitable than ever before. There's still significant growth potential ahead, too. The U.S. Census Bureau reports that only about 16% of retail sales are online, with more to come in the future. With its ubiquitous name tied to online shopping, Amazon is well-positioned to capture a large share.
Wolfspeed (WOLF)
Wolfspeed is a lesser-known player but could provide significant growth potential for early retirees. The company makes next-generation energy equipment using carbon-hardened silicon, which improves the durability and performance of ordinary silicon. You can find it in everything from data centers and solar power systems to heat pumps.
Its most promising use, however, is in electric vehicle (EV) powertrains and EV charging technology. This material can handle the heavy-duty electrical loads that the world is now producing, especially given the volts and amps that batteries are now delivering to electric motors or other power-consuming equipment.
Manufacturers are still figuring out how to cost-effectively integrate this solution, leading to inconsistent revenue. However, analysts expect top-line growth of more than 42% next year and 57% growth the year after that, once the silicon carbide train reaches full speed.
Selective Use of Enrichment Data
While researching these stocks, it's important to consider growth potential and risk factors. PepsiCo's strategic acquisitions and product expansion in plant-based beverages and functional health drinks help demonstrate its growth potential. However, it also faces regulatory pressures and criticism regarding its products' sodium, sugar, fat, and artificial colors.
Amazon, another commonly suggested investment, boasts strong growth and market dominance in e-commerce and cloud computing. It's also expanding into various sectors, including live sports and entertainment. However, Amazon faces intense competition from companies like Google and Microsoft and is subject to regulatory scrutiny.
Wolfspeed, with its focus on semiconductor technology, especially in the electric vehicle market, offers significant growth potential. However, the company faces financial challenges, operational inefficiencies, and legal risks.
Investing for early retirement requires careful consideration of both growth potential and risk factors. Diversification, risk tolerance, a long-term view, and financial health are crucial factors to consider when creating a portfolio. It's essential to conduct thorough research and consult with a financial advisor before making investment decisions.
Investing in PepsiCo (PEP) could be beneficial for those looking to retire early, as the company's strategic acquisitions and product expansions in areas like plant-based beverages and functional health drinks suggest growth potential. Finance-wise, reinvesting dividends and a stock buyback program have contributed to impressive growth over the past 30 years.
When considering Amazon (AMZN) as an investment for early retirement, it's crucial to note the potential growth of its cloud computing services sector, expected to grow at an average annualized pace of 22% through 2030. Amazon's increasing profit in online shopping and its well-established position in the e-commerce market make it a compelling choice for early retirees seeking financial stability.
