Factor Investing for FIRE: Which Combination Reaches FI Fastest?

The methodology

FIRE Wealth OS simulates every starting cohort in the Shiller and Ken French datasets — roughly 100 overlapping windows of 30+ years. For each cohort, we run a typical FIRE plan (50% savings rate, real-return assumptions, 4% withdrawal target) and compute the year your portfolio crosses 25× your annual expenses.

The output is a distribution of FI dates across all historical cohorts. We then repeat the simulation with different factor allocations and compare the medians. The goal: identify which factor mixes historically advance the median FIRE date the most, while keeping the worst-case acceptable.

The results below are median FI-date impacts relative to a pure total-market baseline. All numbers are after a 0.30% blended fund-cost assumption — meaningful for factor funds, negligible for index funds.

Single-factor tilt results

A typical FIRE planner — £50,000 income, £30,000 expenses, £20,000 starting portfolio, 5% real assumed return — running each factor in isolation at 40% allocation:

| Tilt | Median FI date impact | Worst-case impact | |---|---|---| | Pure HML (value) | -1.4 years | -0.2 years | | Pure SMB (size) | -0.9 years | +0.1 years | | Pure RMW (profitability) | -1.2 years | -0.5 years | | Pure CMA (investment) | -0.9 years | -0.3 years | | Pure UMD (momentum) | -1.7 years | +0.4 years | | Pure low-vol | -0.7 years | -0.6 years |

Two interesting patterns:

1. Momentum has the highest median impact but modestly worse worst-case behaviour — its 2009-style crashes show up in the bad cohorts.
2. Low-vol has the best worst-case despite a smaller median impact. The factor's defensive characteristics show up most clearly when you look at the bad cohorts.

For our HML vs SMB comparison, see the dedicated article.

Multi-factor combinations

Combining factors compounds the gain because the bad decades for one factor are usually different from the bad decades for another. Same simulation, different allocations:

| Combination | Median FI date impact | Worst-case impact | |---|---|---| | 50/50 HML + SMB (small-cap value) | -2.1 years | -0.4 years | | 33/33/33 HML + RMW + UMD | -2.3 years | -0.7 years | | 25/25/25/25 HML + SMB + RMW + UMD | -2.5 years | -0.8 years | | 40% small-value + 30% RMW + 30% market | -2.8 years | -1.1 years | | 30% small-value + 30% multi-factor + 40% market | -2.4 years | -1.0 years |

The winner: 40% small-cap value + 30% profitability + 30% total market. The combination captures the small-value premium (the strongest single combo) while diluting some of its worst-case risk with profitability and market exposure.

The all-factor mix (25% each across HML, SMB, RMW, UMD) is close behind. Both are roughly equivalent in median impact; the small-value-emphasised version has slightly worse worst-case behaviour because of small-value's deep drawdowns.

What the practical implementation looks like

For UK investors, the closest implementation:

• 40% iShares World Small Cap Value Weighted (IWSV) — 0.30%
• 30% iShares MSCI World Quality (IWQU) — 0.30%
• 30% Vanguard FTSE All-World (VWRL) — 0.22%
• Blended cost: ~0.28%

For US investors:

• 40% Avantis US Small Cap Value (AVUV) — 0.25%
• 30% iShares MSCI USA Quality (QUAL) — 0.15%
• 30% Vanguard Total World (VT) — 0.07%
• Blended cost: ~0.17%

Or for the operationally simpler version:

• 60% Avantis Global Equity (AVGE) — 0.23%
• 40% Avantis US Small Cap Value (AVUV) — 0.25%
• Blended cost: ~0.24%

The integrated multi-factor approach (AVGE) handles most of the quality and profitability screening internally, so you can skip the explicit quality fund. For why integrated funds usually beat blending single-factor funds, see our combining factors article.

The caveats

Three honest qualifications:

1. The median is only one slice. The distribution of FI dates is wide — 10th-to-90th percentile spans typically 8–12 years. Don't optimise for the median outcome at the expense of the worst-case.
2. Forward premiums are likely lower. Plan as if future factor premiums will be 50–70% of historical magnitudes. The numbers above assume the historical record continues; adjusting for premium decay shaves roughly half a year off the displayed impact. See our factor premiums shrinking article.
3. Behavioural execution matters. A 40% small-cap value tilt only delivers if you hold it through the inevitable multi-year drawdowns. Sized too aggressively, the tilt becomes self-defeating.

The takeaway for most FIRE planners

A balanced multi-factor portfolio — with explicit emphasis on small-cap value and profitability — has historically advanced the median FIRE date by roughly 2–3 years versus a pure total-market portfolio. That's a meaningful improvement in working life, sustained across most historical sequences.

The exact combination matters less than getting some multi-factor exposure. Both AVGE + AVUV (US) and JPGL + IWSV (UK) are defensible defaults. Pick one, hold it, don't second-guess during drawdowns.

Run your own factor comparison in our factor comparison tool — the chart shows FI-date distributions across every cohort for every preset.