Are FIRE ETFs All They're Cracked Up To Be?

The first funds to champion the FIRE movement goals—Financial Independence, Retire Early—by putting the goals’ acronym in their name, debuted on Nov. 19, 2024. The FIRE movement is popular among millennials and other younger investors. But some experts wonder if this is just a fad that shareholders will ignore, instead picking capital appreciation and income funds or individual securities on their own.? The answer likely lies in whether FIRE ETFs are all they’re cracked up to be.

Whether you use funds with or without the FIRE branding in their name—or even individual securities—you can execute your own FIRE investment strategy through some of the best brokers like Fidelity or Charles Schwab. You can also do it on your own, through an IRA, or even via a 401(k) plan that offers a brokerage window. 

FIRE Movement: What’s Old, What’s New

The FIRE movement’s roots extend back to the 1992 best-selling book “Your Money or Your Life.” Yet the first goal-named funds have only just debuted. FIRE Funds Wealth Builder ETF (FIRS) aims for capital appreciation. FIRE Funds Income ETF (FIRI) is focused on yield that retirees can live on. Both funds are actively managed. FIRI had $503,072 in net assets as of Nov. 21. FIRS was $506,511 in size.

The Need That FIRE ETFs Aim to Fill

The FIRE strategy, which is often referred to as a movement, advocates extreme savings and investment. Its goal is to be able to retire far earlier than traditional budgets and retirement plans allow. FIRE proponents often aim for saving about 25 times their annual expenses, in the expectation that such a nest egg will enable them to retire comfortably. Despite the FIRE movement’s growing popularity, few U.S. workers actually retire early.

The two FIRE funds launched by Tidal Investments aim to help FIRE investors by making it easier, by themselves, to find reasonably priced investment vehicles designed to accomplish their FIRE goals.

“I don’t expect that every FIRE person is going to look at this and go, ‘Man this is great,” Michael Venuto, chief investment officer and co-founder of FIRS and FIRI’s investment adviser Tidal Investments and a co-manager of both portfolios, said in an email exchange with Investopedia. “But I do think it’ll create debate and discussion and you know maybe guide us towards the product that is important to the [FIRE] community. We think the future is less and less, you know, the old-school advisor charging you high up-front fees, and it consists more and more in thoughtful communities of individual investors finding investments on their own.”

Why Invest in a FIRE ETF?

FIRS and FIRI are both funds of funds, holding 10 to 25 other ETFs That format offers shareholders—especially those with less experience—a one-stop-shopping opportunity that tends to make investing easier.

“You’re basically buying a portfolio with one fund,” said Lawrence Carrel. “So they do the research for you by combining funds to achieve a certain outcome. This saves you the trouble of having to research a ton of ETFs to decide which ones you want.”

Carrel is the author of “ETFs for the Long Run: What They Are, How They Work, and Simple Strategies for Successful Long-Term Investing,” and wonders if shareholders, no matter how inexperienced, need all that much help.

“Funds have usually been sold as a way to save for retirement,” he said. “So, to make a product that says you’re saving for retirement is just stating the obvious.”

And Carrel wonders whether such funds help shareholders achieve one of their presumably core goals.

“[A] large part of ‘financial independence, retire early’ requires people to save a large part of their income,” Carrel said. “How are these funds helping people save money?”

Still, financial independence requires minimizing damage from hazards ranging from inflation to deflation and recession. Accordingly, FIRS and FIRI are built for risks that pop up over the long term. FIRS, for instance, has a mandate to use not just equities and stock funds to rack up capital appreciation, but also other tools:

• For protection against recession: low-volatility ETFs, long-short ETFs, and alternative asset ETFs.
• To combat inflation: commodities including digital assets and real estate.
• As a hedge against deflation: the fund can bulk up on fixed income securities.

Still, there’s a downside to the diversification needed to cope with that wide range of risks.

“FIRS [is] likely to appeal to individuals who are focused on long-term stability and wealth-building,” financial advisor Bob Chitrathorn, founder and vice president of Simplified Wealth Management, wrote in an email to Investopedia. “It might underperform during periods of strong market growth but could provide more consistent returns in volatile markets.”

How to Invest in a FIRE ETF

Here are steps for investing in a FIRE ETF directly or through a broker, an IRA, or a 401(k) plan with a brokerage window:

You can start by going to the FIRE ETFs home page and clicking on the INVEST tab in the upper right corner. Click the button for whichever fund, FIRS or FIRA, you choose, then pick one of the 12 brokers offered. If you don’t have an account at one of them or prefer some other broker, go to your preferred broker’s website or contact your financial advisor. If you are still doing research, you can find the prospectus, summary prospectus, and statement of additional information (SAI) on fire-etfs.com.

FIRS is waiving its 0.48% fee, or annual expense ratio, according to Venuto. FIRI is waiving its 0.70% fee. But any fees charged by the underlying funds remain in effect.

Other Investment Accounts To Plan for Early Retirement

What other investment accounts should you consider when planning for an early retirement? The goal is to build your nest egg as fast as possible, so consider using traditional IRAs, Roth IRAs, and a 401(k) account. They provide cocoons where your investments can grow without being taxed year by year. Traditional IRAs and 401(k)s offer up-front tax deductions for your contributions. Roth IRAs offer tax-free withdrawals for properly timed withdrawals of investment earnings and of your contributions at all times. The combined annual contribution limit for Roth and traditional IRAs for the 2024 tax year is $7,000, or $8,000 if you’re age 50 or older.

Compare the Top Investing Platforms for Buying FIRE ETFs

Company	Account Minimum	FIRE ETFs Available	Account Fees
Fidelity	$0	FIRS, FIRI	$0 for ETF trades
Charles Schwab	$0	FIRS, FIRI	$0 for ETF trades
E*Trade	$0	FIRS, FIRI	No commission for ETF
SoFi Active Investing	$0	FIRS, FIRI	$0 commission to trade ETFs
Webull	$0	FIRS, FIRI	$0 commissions for ETFs
Vanguard	$0	FIRS, FIRI	$0 commissions for ETFs
Interactive Brokers	$0	FIRS, FIRI	$0.00 commissions for ETFs
Betterment	$0, $10 minimum to start investing	FIRS, FIRI	0.25% (annual) for investing plan accounts with at least $20,000 or at least $250 per month in recurring account deposits. Otherwise, the fee is $4/month. 0.65% (annual) fee on accounts with at least $100,000 in assets for Betterment Premium account holders with unlimited access to certified financial planners. Crypto accounts are charged a annual fee of 1% plus trading expenses. There are no management fees for Betterment Checking or Cash Reserve. For accounts with at least $2 million, there is a fee discount of 0.10%.
Public	$0	FIRS, FIRI	$0.00 commissions for ETFs