'FIRE' ETFs catering to retire-early strivers make their debut

It's a pipedream for many, but a trend that espouses making and saving enough money to quit a soulless day job and retire early has inspired a pair of new ETFs.

Scan any TikTok or Instagram feed lately and you'll be awash with advice on how to achieve the goals of the Financial Independence Retire Early, or FIRE movement. On Tuesday, Tidal Investments introduced the first ETFs — the FIRE Funds Wealth Builder ETF (ticker FIRS) and the FIRE Funds Income Target ETF (FIRI) — to directly cater to those looking to achieve the job-free lifestyle.

"The FIRE community has been ignored by Wall Street, and it's such an amazing group of do-it-yourselfers," said Michael Venuto, Tidal's co-founder and chief investment officer. "This is our way of introducing ETFs beyond the Vanguard S&P 500s to the FIRE community." 

The movement has grown increasingly popular with the day-trading crowd. FIRE proponents on sites like Reddit, where r/financialindependence has 2.3 million members, urge would-be savers to sock away half their paychecks during their early working years, with the goal of building up enough of a financial cushion to be able to retire while still relatively young. 

But that's a gargantuan task for many Americans where living paycheck to paycheck is often the norm. A large slice of Americans, increasingly older ones, have no money saved for retirement — making it a near-impossible goal for many. A typical person thinks they need $1.5 million to retire — about 17 times more than the $88,400 savers set aside on average — one study showed.

READ MORE: Advising the FIRE client: Fan the flames or put them out?

And some ETF experts are skeptical, given the mixed performance of thematic strategies. Investment approaches based on acronyms tend to have poor track records on delivering returns for investors, according to Ben Johnson, head of client solutions at Morningstar.

"The connection between these funds' investment strategies and the FIRE acronym seems to be more a marketing tactic than a fundamental input into their investment processes," he said. "The Wealth Builder fund appears to be a rebranded riff on risk parity."

FIRS would be a fund of funds, holding other ETFs that target four categories: prosperity with a focus on stocks, recession with a bent toward gold assets, inflation concentrating on short-term Treasuries and also deflation targeting bonds, according to a filing. 

READ MORE: How the FIRE movement keeps burning in a tough economy

Johnson was also skeptical of the FIRI product, an actively managed fund that targets a 4% yield. That, Johnson said, may be "a really risky strategy in an environment where interest rates or dividend yields on quality assets trend below its target payout rate."

The two funds offer some advantages though, particularly for ETF issuers that decide to work with Tidal.

"We're doing this for Tidal clients," Venuto said. "These ETFs primarily will be buying Tidal client ETFs. So if you become a client of Tidal, you have the opportunity to be included in the FIRE ETFs."

Another feature may appeal to investors: Tidal is not charging a fee for either product.