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Investing in US and UK stocks in combination with long-term outlook could be a path to a luxurious retirement. By sticking to the plan and dedicating a substantial amount of income each month, it is possible to bring significant benefits and achieve generational wealth.
I know it’s an overused phrase, but it’s worth repeating: the earlier the one, the better. The miracle of combined returns means there can be a huge difference between 20 and 30 years. The snowball effect means that returns grow exponentially and each year grows even more rapidly.
But that doesn’t mean it’s easy or guaranteed. There are countless different geopolitical factors that should be considered to be able to rise or tank the global market. Sometimes it can be a neurite experience that requires patience and dedication, but the reward may be worth the risk.
Let’s do some calculations.
The road to wealth
S&P 500 It has averaged 12% return over the past decade, including dividends. FTSE 100 It returned only 6.3%. This suggests that investors should focus purely on US stocks, but a combination of both is a good way to protect your portfolio from market slump in one region.
It is realistic to assume that a balanced UK portfolio and US stocks can return an average of 8%. A monthly investment of £300 in an 8% portfolio could grow to £177,884 over 20 years. Continuing for another 20 years, compound interest returns totalling up to £1,054,284.
It’s been a long time, but if a dedicated investor started at 30, it could be reached soon after retirement. Even a late starter, age 40, could reach almost half a million in 30 years.
UK’s top growth stocks
The S&P 500 may have hosted several impressive growth stocks in recent years, but the FTSE 100 should not be ignored. Stocks like Game Workshop and Alpha Group In recent years, I have been enjoying some spectacular growth.
But I am more partial for established companies with proven track record of long-term growth potential. I think UK investors should consider it 3I Group (LSE: III) is an international investment company that focuses primarily on private equity and infrastructure.
Its portfolio includes stable cash-generating companies that support consistent dividend payments. Its flagship holding, Action, is a European discount retailer, and has brought extraordinary growth.
Stocks have steadily increased from 460p to 3,874p per share. This is a 742% increase, representing an annual growth of 11.2% per year.
Dividend growth is even more impressive, increasing its compound annual rate of 32% over the past 15 years. This shows a strong commitment to returning value to shareholders.
However, there are drawbacks to consider. As a private equity company, 3i’s revenues are volatile and could be closely tied to the economic cycle. Performance fees and asset valuations can fluctuate with market sentiment and affect dividend stability. Furthermore, reliance on several important assets, such as actions, introduces concentration risk.
Still, the company offers consistently strong performance, reflected in rising net asset value (NAV) and growing dividends. Infrastructure investments in particular provide reliable income over time and are attractive to those seeking passive income.