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If you are retiring in your 30s, you have far less time to wait for a volatile stock to even out and grow, giving you a good return on your investment. You might, then, want to make a safer investment in bonds, but these may not accumulate fast enough to allow you to retire early.

A stock represents a stake in a company. When you own a share of a stock, you are a part owner in the company and have a claim on every asset and every penny in the company’s earnings. [18] A bond is a financial IOU from a company or the government. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects.

A bond is a financial IOU from a company or the government. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money to the issuer, whether it’s a company or a government body, for a certain period of time. In return, you get interest on the loan, and you get the entire loan amount paid back either on a specific date (the bond’s maturity date) or a future date of the issuer’s choice. For example, if a bond is valued at $1,000, and pays 7% a year, it has an interest value of $70.

You can invest in stocks and bonds by buying them individually or by buying them via a mutual fund. A mutual fund is a collection of stocks, bonds, or cash equivalents, or a mix of all three.[19]

The usual recommendations for investing are a little different if you are planning to retire in your 30s. This is because you have a shorter period of time in which to make investments that are risky but may possibly be high-yield down the line. Stocks are riskier investments, and are better as long-term investments, since the idea is that you will be working and able to still support yourself if the stocks are not doing well for a period. Then as you get older and stop working, the recommendation is convert your investments into bonds, which are less volatile but don't have the potential to be high-yield like stocks do.