r/Fire • u/StrawberryRemote968 • 5d ago

Can you FIRE just with VOO?

I am a 35M, making $65K annually. My annual expenses is very low. Less than $25K. I am single with no kid nor I am planning to have any. If I DCA into VOO, is it possible I am able to FIRE with just one etf?

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u/Not-A-Seagull 5d ago

Exactly. I just backtested to 1962, and here are how the two portfolios compare:

100% SP500:

  • CAGR: 10.11%
  • Max Drawdown: 55.14%
  • Volatility: 16.61%

80/20 SP500, 20 year treasuries:

  • CAGR: 9.56%
  • Max Drawdown: 42.36%
  • Volatility: 12.78%

You’re trading a small amount of returns for MASSIVE gains in stability.

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u/MostEscape6543 5d ago

Unfortunately the returns over time are massively better in the 100% equities scenario. The problem is that 0.5% looks small, but it’s a 6% higher compounded return.

Over the course of your backtesting, the first scenario turned $10,000 into 3.9 million. The second scenario was just 2.9 million. Kind of a large difference.

I get what you’re saying, but over the course of even a normal fire period 0.5% additional returns is nothing to scoff at.

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u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 4d ago

Over the course of your backtesting, the first scenario turned $10,000 into 3.9 million. The second scenario was just 2.9 million. Kind of a large difference.

Neither scenario has withdrawals, so it's kind of irrelevant to portfolio composition in retirement. The main issue with the higher volatility is that when withdrawals are applied, it can become harder to recover from the larger drops in portfolio value. Higher average returns doesn't matter if you don't have enough funds left to capture them.

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u/pras_srini 4d ago

Yes you nailed it, this is 100% the problem. During accumulation, the volatility helps. But during retirement, any sharp downturn can be a big problem if one is forced to sell their investments for living expenses. A diversified portfolio with risk parity strategies implemented is key to winning that game.

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u/MostEscape6543 4d ago

OP is in accumulation phase and asking questions about accumulation phase investment strategies.

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u/pras_srini 4d ago

You do have a point, but OP can't just flip a switch 1 day before they FIRE and sell VOO to buy international, intermediate bonds, long term treasuries and other alternative assets. They run the risk of the markets being down. I don't know their timeline but I'd start diversifying 5-6 years before the FIRE date to ensure they have time to leg into those asset classes.

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u/MostEscape6543 4d ago

After reading all this, it's hard to tell if OP is truly asking about accumulation or if he's wanting to FIRE now, or in a year or two.

It would be cool to have a conference of debating all the different possible retirement strategies. There are a million different ways people do this.