Best Index Funds for FIRE
Why Index Funds Are the FIRE Investor's Best Friend
Index funds are the foundation of the FIRE investing strategy — and for good reason. Instead of trying to pick winning stocks (which even professional fund managers can't consistently do), index funds simply track the entire market at an extremely low cost.
The math is compelling: an S&P 500 index fund with a 0.03% expense ratio costs $3 per year for every $10,000 invested. A typical actively managed fund at 1.0% costs $100 per $10,000. Over 30 years, that fee difference alone could mean $100,000+ more in your pocket.
Warren Buffett famously instructed his estate to invest 90% in an S&P 500 index fund and 10% in short-term government bonds after his death. If it's good enough for the Oracle of Omaha, it's worth considering for your FIRE portfolio.
S&P 500 Index Funds (Large-Cap US Stocks)
S&P 500 funds track the 500 largest US companies and are the most popular choice for FIRE investors:
Vanguard S&P 500 ETF (VOO) — Expense ratio: 0.03%. The gold standard. $500B+ in assets, extremely liquid.
iShares Core S&P 500 ETF (IVV) — Expense ratio: 0.03%. Nearly identical to VOO, slightly different structure.
SPDR S&P 500 ETF (SPY) — Expense ratio: 0.09%. The oldest ETF, higher fees than VOO/IVV but highest trading volume.
Fidelity 500 Index Fund (FXAIX) — Expense ratio: 0.015%. The cheapest option, great for Fidelity accounts.
For most FIRE investors, VOO or FXAIX are the best choices. The differences are minimal — pick whichever is commission-free on your brokerage platform.
Total US Stock Market Funds (Broader Diversification)
Total market funds include small-cap and mid-cap stocks in addition to the S&P 500, providing broader diversification:
Vanguard Total Stock Market ETF (VTI) — Expense ratio: 0.03%. Tracks ~4,000 US stocks. The most diversified US stock fund.
Schwab Total Stock Market Index (SWTSX) — Expense ratio: 0.03%. Excellent choice for Schwab accounts.
Fidelity Total Market Index Fund (FSKAX) — Expense ratio: 0.015%. Fidelity's equivalent, extremely low cost.
While S&P 500 and total market funds perform nearly identically (they overlap ~80% by weight), total market funds provide a bit more diversification with the same cost. Most FIRE investors use either VTI or VOO interchangeably.
International Stock Funds (Global Diversification)
The US has outperformed international stocks recently, but past performance doesn't guarantee future results. Adding international exposure reduces risk:
Vanguard Total International Stock ETF (VXUS) — Expense ratio: 0.07%. Covers developed and emerging markets outside the US.
iShares Core MSCI Total International Stock ETF (IXUS) — Expense ratio: 0.07%. Similar coverage to VXUS.
Fidelity Total International Index Fund (FTIHX) — Expense ratio: 0.06%. Cheapest international total market option.
A common FIRE allocation is 70-80% US stocks (VTI/VOO) and 20-30% international stocks (VXUS). Some FIRE purists skip international entirely — this is a personal decision based on your conviction about US market dominance.
Building Your FIRE Portfolio: The Simple 2-3 Fund Approach
You don't need a complex portfolio. The simplest FIRE portfolio has just 2-3 funds:
Two-Fund Portfolio: - 80% VTI (Total US Stock Market) - 20% VXUS (Total International Stock)
Three-Fund Portfolio (adds bonds for stability): - 60-70% VTI - 20-25% VXUS - 10-15% BND (Total Bond Market)
During the accumulation phase (while you're still working), many FIRE investors skip bonds entirely and hold 100% stocks for maximum growth. As you approach retirement, gradually adding bonds (up to 20-30%) reduces volatility.
Use our Investment Fee Calculator to see the huge difference between low-cost index funds and expensive managed funds over 20-30 years.