2-ETF Portfolios: Investing Can Be Simpler
How I combine 1 offense ETF, 1 defense ETF and my ROAR Score to create effective, durable, risk-managed portfolios, without a lot of mess or stress.
After 30 years and over 130,000 hours in the professional investing world, I’ve reached a conclusion that would have shocked me at the start of my career: For many investors, a core portfolio can consist of as few as two ETFs. This has much more to do with how markets now function.
In today’s market, complexity is often a distraction. We are surrounded by algorithmic trading that creates daily whipsaws, a dominant indexing culture that moves thousands of stocks in unison, and a “risk-on/risk-off” environment that has neutered traditional diversification. For the modern DIY investor, the biggest remaining edge isn’t stock picking—it’s risk management.
The Evolution of the “Core” Portfolio
The 2-ETF portfolio is actually more of a 3-piece investing suit designed for the realities of modern markets:
A way to play “Offense”: Something related to the stock market, most likely.
A way to play “Defense”: Something that can do well when stocks don’t.
A tactical allocation method: A disciplined system to shift the weight between those two ETFs. Importantly, every investor can potentially have their own preference for what type of “guardrails” they install around that 2-ETF mix.
Think of it like a Peanut Butter and Jelly sandwich. You own both ingredients all the time, but the secret is in determining how much PB and how much J to put in that sandwich at any given point in the market cycle.
The ROAR Mechanism: The Engine of Tactical Allocation
The ROAR (Reward Opportunity And Risk) Score is the tactical engine I created over the course of 3 decades. I use it to dictate the mix between a set of 2 or more ETFs (or stocks) at any given time. Developed as a technical indicator, it processes raw market data to answer one critical question: “Is this stock or ETF more likely to rise 10% in price before it falls 10%?”.
By identifying where the path of least resistance lies, the ROAR mechanism allows for a disciplined, weekly adjustment of my portfolio weights. This systematic approach removes the guesswork and emotional stress, focusing entirely on capturing upside while prioritizing the avoidance of major “learning experiences”—otherwise known as big losses.