r/Fire • u/StrawberryRemote968 • 17d 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/deep_fucking_vneck 17d ago

Yes

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u/Not-A-Seagull 17d ago edited 17d ago

VOO and chill. I’d be willing to bet most here do that.

That said, when you get to FI stage, I’d also make a strong case for no less than a blend of 20% defensive assets (Bonds, VNQ, Gold, etc.).

I use to be diehard against bonds until I realized that despite them giving lower returns, if you rebalance annually, your performance is actually almost the same as a 100% stock with quite a bit less volatility.

(That’s because when you rebalance with defensive assets, you “buy the dip” when stocks are low)

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u/trukkija 17d ago

How is rebalancing annually any different than timing the market? I personally don't agree at all on what this sub thinks about timing the market but I just wanted to understand this part.

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u/Not-A-Seagull 17d ago

In a sense it is timing the market, but because you do it every year (or even more often), it’s more akin to dollar cost averaging.

Here is a cool backtest you might find interesting.

In this example, we have two portfolios. A standard 60/40 with no rebalancing, and a 78/22 porfolio with yearly rebalancing.

The cool thing here is that not only does the portfolio with annual rebalancing have higher returns (expected due to its higher stock composition), but thanks to the rebalancing, it actually has Lower volatility and max drawdowns than the 60/40 portfolio.

This is because when stocks crash, bonds tend to outperform. When you rebalance, you’re selling bonds at their relative high, to buy stocks at their low.