Investing in the stock market feels risky to many people. We’ve all seen the headlines: the dotcom crash, the 2008 financial crisis and, more recently, the wild swings in AI stocks.
It’s easy to think the market’s just a casino. However, smart investors ignore the noise and focus on steady, stable shares that compound over multiple decades.
That’s how even a 40‑year‑old could go from surviving in retirement to thriving. So how much would they actually need?
A market average assessment
Estimates suggest a UK retiree needs around £32,700 a year to get by. That’s about an extra £20,152 on top of the State Pension. The recommended retirement withdrawal rule suggests only taking out 4% of savings a year. So you’d need around £503,800 (4% of £503,800 is £20,152).
That’s a chunky amount of money to save, but how could a 40‑year‑old do it in just 25 years or so? Using the stock market’s historical nominal growth rate of 9%, it would require £446 a month to get there. For a moderate earner with a dedicated savings plan, that’s achievable.
For a 35‑year‑old, it would only require £273 a month. That shows just how much a few years difference makes when compounding wealth.
A stock to consider
While no single stock could guarantee a 9% average return, a diversified basket of stocks could aim for that. For example, the electricity and gas provider National Grid‘s (LSE: NG) a popular long‑term holding that has historically delivered returns in that region. As a regulated utility, it enjoys reliable revenues and stable cash flows.
The company is committing £50bn+ of investment until 2029 on grid upgrades and green projects, which should support earnings growth.
Critically, shareholders benefit from a mix of dividend yield plus modest capital growth, with a trailing dividend yield typically around 4%.
| Key metric | Value |
|---|---|
| Earnings per share (EPS) | 78p |
| Dividend per share (DPS) | 48.49p |
| Total equity | £37,803m |
| Total debt | £47,539m |
The fact that debt outweighs equity isn’t ideal. However, in National Grid’s case, it’s the result of heavy investment rather than bad planning. If the upgrades go ahead without issue, it should all pay off in the end.
Still, no stock’s 100% safe. The company faces regulatory risk in both the UK and US, and is highly sensitive to interest rates given its bond‑like nature. That leaves some uncertainty regarding future earnings.
The bottom line
National Grid might be boring, but that’s exactly why it’s worth considering for a long‑term retirement portfolio. In a world obsessed with the next big thing, there’s something refreshing about a company that simply keeps the lights on.
While tech stocks grab headlines, utility companies quietly collect regulated returns and pay out dividends like clockwork. For a 40‑year‑old plotting early retirement, that predictability is gold.
The question isn’t whether it will make you rich overnight – it won’t. The real question is, could a portfolio of similar steady performers, combined with consistent monthly investing, be your ticket to retiring on your own terms?
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Mark Hartley owns shares in National Grid.
