Looking to FIRE? Here are 2 ASX ETFs to get your portfolio started

The Financial Independence, Retire Early (FIRE) movement has been gaining in popularity in recent years, as increasingly investment-savvy people look to start early on the investing journey.

Break the shackles

The goal is to build a sufficient nest egg to support an early retirement, taking advantage of the significant benefits of compound interest, often coupled with a frugal approach to spending.

A commonly cited savings target is to accrue a portfolio worth 25 times your annual expenses which can then be drawn down over time – this is known as the 4% rule.

One of the main tenets of the FIRE movement is also that rather than picking individual stocks, investors should buy index-tracking exchange-traded funds (ETFs), which remove the volatility of single stocks and if they track the right indices, tend to perform relatively predictably over time.

Once bought, investors are encouraged to regularly invest into the same portfolio of ETFs, and ignore market volatility in favour of a long-term view.

Two of the indices favoured by many in the Australian FIRE community are the Vanguard Australian Shares Index ETF (ASX: VAS), and the Vanguard MSCI Index International Shares ETF (ASX: VGS).

Local focus

With regards to VAS, Vanguard says it is Australia’s largest ETF, which gives investors exposure to the top 300 companies listed on the ASX.

Vanguard says on its website:

The ETF provides low-cost, broadly diversified exposure to Australian companies and property trusts listed on the Australian Securities Exchange. It also offers potential long-term capital growth along with dividend income and franking credits.

Not surprisingly, the fund’s largest holdings are in the big four banks, as well as BHP Ltd (ASX: BHP).

According to the Vanguard website, $10,000 invested five years ago would now be worth $14,793.

VAS has a management fee of 0.07%.

Looking further afield

The VGS ETF has a much wider remit than VAS, with exposure to about 1300 companies from developed countries, notably excluding Australia so it doesn’t double up with VAS.

Vanguard says on its website:

Investing internationally offers greater access to sectors such as technology and health care that aren’t as well represented in the Australian share market. The ETF provides exposure to many of the world’s largest companies listed in major developed countries. It offers low-cost access to a broadly diversified range of securities that allows investors to participate in the long-term growth potential of international economies outside Australia.

The ETF’s largest holdings are in US tech companies including Nvidia, Apple, and Microsoft.

Vanguard said $10,000 invested five years ago would now be worth $18,450.

The management fee for VGS is 0.18%.

The post Looking to FIRE? Here are 2 ASX ETFs to get your portfolio started appeared first on The Motley Fool Australia.

More reading

• Where to invest $5,000 in Vanguard ETFs in June
• 3 ASX ETFs to diversify away from a flat Aussie market
• 3 reasons why this ASX ETF could be an incredible buy-and-hold forever idea
• Can you turn $20,000 into $100,000 with ASX shares?
• Top 10 ASX shares bought and sold by investors in May

Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. The Motley Fool Australia has recommended Apple, BHP Group, Microsoft, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.