Forget buy-to-let! I’d invest £1k today in these 2 FTSE 100 stocks to retire early

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While property prices across the UK have stagnated in the past couple of years, the FTSE 100 has delivered an improving performance.

For example, its total return in 2019 was over 16%. And with many of its members appearing to offer good value for money at the present time, there may be scope to generate impressive returns in the long run.

With that in mind, here are two large-cap shares that could be worth buying today. They may improve your chances of building a nest egg that enables you to retire early.


RBS’s (LSE: RBS) recent quarterly update showed that the bank is making progress in implementing its strategy despite experiencing continued operational challenges. Although its income was broadly stable across most of its divisions, its operating profit was almost entirely wiped out by a PPI provision of £900m.

However, as PPI claims are set to subside, the company could experience an improving financial performance. In the current year, for example, it is expected to produce a rise in its bottom line of 6%, with a gain of 9% forecast for next year. This puts the stock on a forward price-to-earnings (P/E) ratio of just 8.4. This suggests that it could offer a wide margin of safety at the present time.

Although the UK economy’s outlook is relatively uncertain at the present time, figures for things like inflation and wage growth suggest that RBS and its peers may enjoy a stronger outlook than their valuations suggest. Since the stock is expected to have a dividend yield of 6.5% this year, it could offer income investing appeal. Therefore, its total returns could prove to be attractive over the long run.

Rio Tinto

Another FTSE 100 share that could offer long-term growth potential is iron ore mining company Rio Tinto (LSE: RIO). Its recent half-year results showed that its financial performance has been encouraging, with it being underpinned by rising iron ore prices.

Looking ahead, the improving outlook for the world economy could boost the company’s prospects. The trade deal between the US and China may only be a ‘phase one’ agreement, but it suggests that an escalation of the trade war that has dominated news flow over the past couple of years may be over for the time being.

This could cause investors to become increasingly bullish about companies, such as Rio Tinto, that are highly dependent on the performance of the world economy. Therefore, with the stock trading on a P/E ratio of 10.6, it could offer good value for money.

Alongside its low valuation and growth potential, the stock also offers an attractive dividend yield of 5.7%. Certainly, its dividend payout is less stable than many of its FTSE 100 peers, but an improving outlook for the business could mean that its dividend growth rate improves in the long run. This could boost its total returns in the coming years and improve your chances of retiring early.

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Peter Stephens owns shares of Rio Tinto and Royal Bank of Scotland Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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