Hans Lee
The concept of FIRE – short for Financial Independence, Retire Early – is gaining traction among Australians looking to build financial independence and potentially retire earlier than traditional retirement plans allow.
The strategy focuses on saving aggressively, investing consistently and building a portfolio large enough to fund your lifestyle long before traditional retirement age.
In this guide we explain how FIRE investing works in Australia, the role ETFs can play and the steps investors use to build a FIRE portfolio.
What is FIRE Investing?
FIRE stands for Financial Independence, Retire Early. The idea is that participants out additional focus on saving and investing so they can reach financial freedom and retire much earlier than traditional plans usually allow.
There are several variations of the FIRE strategy, and many Australians adapt the approach to suit their lifestyle goals:
- Lean FIRE: Retiring early with a very modest lifestyle
- Fat FIRE: Retiring early with a higher spending level
- Barista FIRE: Working part-time while investments cover most expenses
How FIRE works in Australia
Australia has several built-in mechanisms to support FIRE:
- Superannuation offers meaningful tax advantages (even if access is restricted until preservation age)
- Franking credits help reduce tax on dividends
- The CGT discount rewards long-term investing
Because superannuation cannot be accessed until preservation age, many FIRE investors build investments outside super to fund early retirement.
How to start your own FIRE investing strategy
- Work out your “FIRE number”
Multiply your annual expenses by 25 to estimate how large your portfolio may need to be. The “25× rule” comes from the 4% rule, a common FIRE guideline suggesting retirees can withdraw around 4% of their portfolio annually without running out of money. - Start investing consistently
Begin making regular contributions to investments, such as a low-cost ETF. - Automate everything
Automation via an investing app can help you stay disciplined and consistent over time. - Keep fees low
The lower your portfolio fees, the more you take home in returns. Investment platforms like Betashares Direct allow you to invest in all ASX listed ETFs and 500+ Australian shares with $0 brokerage. - Learn the basics of tax
Understanding how marginal tax rates, franking credits and CGT discounts work can make a meaningful difference to long-term returns. Always seek personal advice where needed. - Stay patient
FIRE is a long-term journey – it takes time, consistency and discipline to see results.
Why ETFs are popular with FIRE investors in Australia
ETFs are popular with FIRE investors because they are simple, low cost and provide instant diversification. A single ASX trade can give investors exposure to hundreds or thousands of companies globally.
DHHF: A popular ETF for FIRE beginners
Some investors prefer a single diversified ETF that automatically spreads money across global and Australian shares. For example, the Betashares Diversified All Growth ETF (DHHF) provides exposure to a globally diversified portfolio in one trade.
DHHF is popular because it provides:
- Low fees for better long-term compounding
- Global diversification, over 8000 shares in one trade
- A 100 percent growth allocation suited to long timelines
- A ‘set and forget’ structure ideal for beginners
- Auto invest when invested through Betashares Direct
Risks of FIRE investing
While FIRE can be powerful, it requires discipline. Aggressive saving may reduce lifestyle flexibility in the short term, and early retirees must manage market risk over longer time horizons.
Low fees matter
Fees can erode returns and, over decades, the difference can be substantial.
For example, if you invest $1000 a month for 30 years and earn an annual return of 7 per cent:
- With a 0.20% p.a. fee, you may end up with about $1.38 million
- With a 0.50% p.a. fee, you might have closer to $1.25 million
In other words, even a 0.3% per annum difference in management fees can knock around $130,000 off your balance.
Let time do the hard work
FIRE investing doesn’t need to be complicated. For many Australians, low-cost ETFs, regular investing and a consistent investing strategy are enough to build meaningful long-term wealth. Whether you choose an all-in-one ETF like DHHF or build a diversified portfolio yourself, the principle is simple: minimise fees, stay consistent and let compounding work its magic.
Betashares Capital Limited ABN 78 139 566 868 AFSL 341181 (Betashares) is the issuer of Betashares Funds and Betashares Invest, the IDPS-like scheme available via Betashares Direct. Read the PDS and TMD available at www.betashares.com.au to see if the product is right for you. This information is general information only and should not be construed or relied on as personal or tax advice. Investors should obtain independent professional advice specific to their personal circumstances. Investing involves risk.