As someone in my early 40s, I’m not planning on retiring any time soon. That’s why I’m more concerned with buying growth shares over income-generating stocks (although I do still own a few of the latter). This has become even more important after The Department for Work and Pensions (DWP) confirmed the qualifying age for a State Pension is to rise earlier than originally planned.
Wait – the age limit is rising?!
In just four years — 2026 — the age at which one can access the State Pension will move from 66 to 67. The original plan from then was for the minimum age to rise to 68 between 2044 and 2046. However, the latter change has now been brought forward by no less than seven years. The increase to 68 will now be accomplished between 2037 and 2039.
For me, this news has merely served as a reminder that it’s best not to rely wholly on the government to prop me up in my golden years. If plans can be changed once, they can be changed again. A lot of people could end up working far longer than they thought or wished.
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I don’t plan to be one of them. Instead, I’m compelled to keep investing in the best growth stocks I can find in the hope of steadily accumulating my capital and possibly retiring ‘early’.
What does a great growth share look like?
I reckon there are a few general characteristics that most great growth shares possess.
Somewhat obviously, there should be a pathway to increasing revenue and profits. What exciting new products or services are on the horizon and will demand for them keep rising? Is there a part of the world that looks like being a lucrative new market? Since nothing comes free, I’m also looking for robust finances. Lots of debt? No, thank you.
Above all, I search for quality operators with leading positions in niche markets. If they don’t have an edge on the competition, why buy the stock?
Taking the above into account, I’m currently running the rule on life-saving tech firm Halma, fantasy figurine-maker Games Workshop and audio equipment business Focusrite.
Risks to consider
Naturally, all investment contains risk. This is particularly the case with growth shares since these often trade at high valuations. Indeed, 2022 has already shown what can happen when investors lose sight of what is a reasonable price to pay, especially if that company is still to generate profits.
Beyond only buying stocks at fair prices, I’m making a point of not keeping my eggs in one basket. A decent amount of diversification is essential if I’m to build a retirement point without tearing my hair out in the process. Hence, this is why I also own a few investment trusts and funds.
Now is the time for me to buy
All that said, I reckon the biggest risk here is to avoid/forget about retirement planning and, consequently, not buy anything at all. This is especially true now as the current market headwinds offer a great opportunity to snap up shares I intend to hold for years.
News that the age of the State Pension is to rise earlier than expected isn’t ideal. But, with a bit of luck, it won’t matter all that much to me anyway.
