Journal / Explainer · 5 min read
ETFs or single stocks for a smoother ride? What we saw
Why ETFs tend to give a smoother ride than single stocks, what happened when we tested stock-based rules, and who might still want stocks.
By Lowdraft. Published October 20, 2026.
We are not against owning stocks. Many people have built wealth with them, and Stock Keels are on our roadmap. But our first goal is a smoother ride: shallower drawdowns and faster recoveries. For that goal, ETFs have a structural advantage, and our own tests agree.
Why ETFs make the ride smoother
- One bad report cannot sink a holding. A single stock can drop 20% to 40% overnight on earnings, a lawsuit or a guidance cut. An ETF holding hundreds of companies absorbs the same news as a small move.
- Diversification is built in. One ticker spreads risk across many companies, sectors or countries.
- Trend signals are cleaner. ETF prices move more smoothly, so a trend rule produces fewer false alarms. Individual stocks gap, and rules built on them get faked out more often.
- Rotation is one ticker. Moving between US stocks, other regions, bonds, gold or cash is a single trade each.
- Liquid and cheap to trade. Large ETFs usually trade with tight spreads, so real results stay closer to the test.
- A software mistake costs less. A wrong order in an ETF is a smaller problem than a wrong order in one stock.
What happened when we tried stocks
We built stock-based Keels to see. They did not beat the ETF Keels on the yardsticks we care about. Two examples from our testing, both hypothetical:
| Keel | Annual return | Worst drawdown | UPI |
|---|---|---|---|
| Dow 30 stocks, smoothest leaders (August 2019 on) | about 9.8% | about −24% | about 1.0 |
| Mixed pool of 20 stocks and ETFs, trend rules (November 2021 on) | about 16.6% | about −13.6% | about 3.2 |
| Our lead ETF Core + Boost Keel (August 2019 on) | about 20% | about −12% | about 8 to 9 |
Hypothetical back-tests with trading costs and a one-day delay. The windows differ, so read the rows as illustrations, not a ranking. The ETF Keel was refined many times and is partly fitted to the past. The stock Keels were earlier attempts and got less tuning. Not a forecast.
It is not a fair fight, and we will not claim it is. But the pattern matches what the theory predicts: the stock-based Keels sat deeper in the water for the return they delivered.
Who might still want stocks
- People who want higher possible growth and accept deeper drawdowns for it.
- People who follow a view on specific companies and want a rule to manage entries and exits.
- People who already hold ETFs and want a small stock satellite.
When Stock Keels arrive, they will be labeled as such, with their drawdown history shown first, because their ride is bumpier by nature.
An honest trade-off
A smoother ride can mean giving up some upside. In a long, strong rally, concentrated stock holdings can run ahead of a diversified ETF Keel. Whether that trade suits you depends on how much of a fall you can sit through without selling at the bottom.
How we measure the ride · Why ETFs, in brief · Join the waitlist
Hypothetical results from our research, prepared with hindsight. Not investment advice, an offer, or a recommendation of any security. Past performance, real or simulated, does not predict future results. You can lose money.