Early retirement is a goal or dream I’m sure most people share. However I believe that with a little smart saving and investing early, over time this dream can become a reality.

To see how, we will start by looking at a persons total economic wealth, showing how they can move into the retirement phase from the accumulation phase more quickly.

Total economic wealth

At any time in a person’s life, total economic wealth is represented as the sum of their financial capital and human capital.

What is financial capital?

Financial capital is basically the sum of all your assets minus your debts.To calculate your financial capital, add up all your savings, share portfolio, superannuation, properties etc, and subtract any debts such as mortgages or student loans you may have.

Obviously financial capital is lower for most people when they are younger as they have not yet had the time to grow their wealth. However, this is where people who are more responsible with their money can see it grow much faster as the effects of compounding take hold. This will help push them closer to their retirement phase.

What is human capital?

Human capital can be thought of as the present value of a person’s expected income from employment throughout their entire life. As you enter the workforce, your human capital is at a maximum since you have the greatest number of years left to work until retirement. Hence as you age and work, your human capital decreases.

So what does this mean?

Roughly speaking, human capital and financial capital are inverse to each other. This can be seen through the chart below.

Chart by author

As a working person ages, their human capital begins to reduce as part of their future earnings are realised. A portion of this income will be saved and often used to pay down a mortgage. In addition, their superannuation will increase as it is paid by their employer. All of these items will increase their financial capital. This continues through the accumulation phase until enough financial capital has been raised to support them through retirement. 

So it appears that the solution to being able to retire early is by growing your financial capital as quickly as possible. This doesn’t mean through risky investments, but instead by starting early and investing regularly. Which is where I believe ASX shares should come into the picture.

How to grow your financial capital

ASX shares have been a phenomenal tool for people to grow their financial capital. This is something I don’t believe will change any time soon. In fact, looking into the majority of  superannuation funds, you will see large allocations to shares – both Australian and international.

Your superannuation in designed to support you during retirement, while our goal is to bring retirement forward. This means investing outside of your superannuation, regularly.

Growing a large portfolio to replace your income prior to retirement may sound daunting. However, one of my fellow writers has shown here that by investing just $1,000 a month you can achieve a share portfolio of $1,000,000 in less than 24 years. Breaking it down into monthly goals is a great way to make the process more achievable.

Of course the sooner you start the better, and I believe now is a great time when you’re focusing on 10, 20 or 30 years down the road.

I would consider investments today in shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Vanguard FTSE Asia ex Japan Shares Index ETF (ASX: VAE) and BetaShares NASDAQ 100 ETF (ASX: NDQ).

More reading

• How to reduce your work to part-time using ASX shares
• My 3 best ASX dividend shares to buy right now
• 2 top ETFs for high growth
• 2 ASX shares I plan to hold til I’m 100
• 3 Warren Buffett ASX dividend shares to buy right now

Motley Fool contributor Michael Tonon owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’ve saved up $1,000 and are looking to invest right now, ASX exchange-traded funds (ETFs) could be the way to go.

ETFs essentially allow you to buy units in a fund that invests in a diversified portfolio of shares. These funds come in many forms and can be specific to a particular country, like Vanguard Australian Shares Index ETF (ASX: VAS), or a sector like the ETFS Morningstar Global Technology ETF (ASX: TECH).

So, before you commit your hard-earned cash to the share market, let’s check out some of the best ASX ETFs to buy today.

Why should I buy ETFs in the first place?

ETFs are a great way to achieve instant diversification. Portfolio construction is critical but it takes time and money. If you’re just looking to invest $1,000 today, this may only buy you a few shares in the S&P/ASX 200 Index (ASX: XJO).

For instance, the CSL Limited (ASX: CSL) shares are currently trading at nearly $300 each which will eat up the majority of your investment for a grand total of only 3 shares in one company. 

However, an ETF like the Vanguard Australian Shares Index ETF gives you broad exposure to the S&P/ASX 300. This ETF essentially tracks the market and means you’re a passive investor.

Investing in ASX ETFs isn’t for everyone and many investors prefer to select individual shares to buy. If you’re a relatively new investor, however, or you like the diversification offered by ETFs, here are a couple of top funds to consider today.

Where to invest $1,000 in ASX ETFs today

I think ETFs have a place in almost any portfolio. Buying ETFs is an easy way to diversify or even target a specific sector or geography.

For instance, If you’re bullish about tech, the ETFS Morningstar Global Technology ETF can top up your exposure without buying shares in each individual tech company.

VAS and TECH aside, iShares S&P 500 ETF (ASX: IVV) could be a strong buy if you’re bullish about the United States. Federal Reserve Chair Jerome Powell is doing everything he can to keep the economy ticking along right now and we could see some strong gains in US markets as a result.

If you’re after an all-in-one solution, the Vanguard Diversified High Growth Index ETF (ASX: VDHG) could be for you. This fund is a diversified global portfolio with a heavier weighting towards the ASX.

Either of these could be great options if you’re just looking to invest $1,000 in a diversified portfolio but don’t know where to start.

More reading

• How to tidy up your super in just 10 minutes this weekend
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week
• How these 3 ASX financial shares have proved their doubters wrong
• 3 ASX shares that I’d invest $1,000 into EVERY month

Ken Hall owns shares of Vanguard Australian Shares Index and Vanguard Diversified High Growth Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and ETFS Morningstar Global Technology ETF. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where to invest $1,000 in ASX ETFs today appeared first on Motley Fool Australia.

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Last week the S&P/ASX 200 Index (ASX: XJO) was on form again and stormed 1.7% higher to end the period at 5,497 points.

While a good number of shares pushed higher last week, some climbed more than most.

Here’s why these were the best performing ASX 200 shares over the period:

The NRW Holdings Limited (ASX: NWH) share price was the best performer on the index last week with a 31.3% gain. Investors were buying the infrastructure contractor’s shares following the least of a trading update. That update revealed that NRW delivered unaudited revenue of $1.6 billion for the 10 months to April 30. This represents record revenue for the company compared to any previous full financial year. NRW’s earnings before interest, tax, depreciation, and amortisation came in at $177 million for the 10 months.

The Nearmap Ltd (ASX: NEA) share price was on form last week and jumped 22% higher despite there being no news out of it. This gain means the aerial imagery technology and location data company’s shares are now up a massive 53.5% since this time last month. Investors may believe that Nearmap’s shares had fallen too hard this year.

The Lynas Corporation Ltd (ASX: LYC) share price wasn’t far behind with a 21.8% gain. This looks to have been driven by a positive broker note out of Canaccord Genuity. It initiated coverage on the rare earths miner with a buy rating and a target price of $3.80. The broker believes that rare earth demand could recover in a post-COVID-19 world. It suspects this could lead to a shortage of the materials by 2023, placing upward pressure on prices.

The Orocobre Limited (ASX: ORE) share price was a strong performer last week with a 21.7% gain. This was despite there being no news out of the lithium miner. Last week the price of the battery making ingredient stabilised after heavy declines a week earlier. And with economies around the world now reopening, investors may believe that the worst is over for Orocobre and its peers.

More reading

• How to tidy up your super in just 10 minutes this weekend
• These were the worst performing ASX 200 shares last week
• Where to invest $1,000 in ASX ETFs today
• How these 3 ASX financial shares have proved their doubters wrong
• How to use ASX shares to become a millionaire

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post These were the best performing ASX 200 shares last week appeared first on Motley Fool Australia.

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