BlackRock Report: Diversification Is Key in 2025
- Low-volatility ETFs and international equity are among the asset manager's top recommendations.
- BlackRock expects slower growth and higher inflation for the remainder of 2025.
- In times like these, diversification is essential.
In its Spring Investment Directions seasonal report, BlackRock Inc. (BLK) recommended exchange-traded funds that can fare better than the broader market in the coming quarter, which the world’s largest asset manager expects to be a continuation of volatility amid shifting trade policy.
On the macroeconomic front, BlackRock expects slower growth and higher inflation for the remainder of 2025, which may force the Federal Reserve to hold its key rate on pause at least through its June meeting.
Meanwhile, hints of recession have crept into soft data, such as the Conference Board’s recent consumer sentiment report, which notched its lowest reading since May 2020.
All this leads to a portfolio construction for the remainder of 2025 that looks like the asset and investment mix that has worked well thus far in the year—a diversified mix of low-volatility stock ETFs, bond funds on the shorter end of duration and gold.
Gargi Pal Chaudhuri, BlackRock’s chief investment and portfolio strategist, summed up the report’s guidance well in her statement: “Higher volatility alongside unreliable stock/bond correlation demands that investors think critically about diversification.”
The $11.5 trillion asset manager’s seasonal guidance can be broken down into the categories of equity, fixed income and alternative assets.
In this article, we provide highlights from BlackRock’s seasonal report, as well as examples of exchange-traded funds—its iShares ETFs and other top funds by AUM—within some of the respective categories mentioned in the report.
BlackRock’s Equity Guidance: Low-Volatility, International ETFs
BlackRock sees the low-volatility factor as a key strategy in filtering out market turmoil in the 2025 economic environment. Specifically, its guidance says the low-volatility factor “offers an asymmetric up/down capture—participating to a greater degree on the upside than on the downside.”
The asset manager also sees diversification opportunities in the international ETF category, as “investors may benefit from structural geopolitical trends while also balancing out the inherent growth bias within their U.S. equity allocations.”
Top Low-Volatility ETFs by AUM
| Ticker | Fund | Expense Ratio | AUM | YTD Return |
| USMV | iShares MSCI USA Min Vol Factor ETF | 0.15% | $23.8B | 4.6% |
| SPLV | Invesco S&P 500 Low Volatility ETF | 0.25% | $7.7B | 4.7% |
| EFAV | iShares MSCI EAFE Min Vol Factor ETF | 0.2% | $5.5B | 16.6% |
Top low-volatility ETF data as of April 30, 2025. Past performance is no guarantee of future results. Source: FactSet
Top International ETFs by AUM
| Ticker | Fund | Expense Ratio | AUM | YTD Return |
| VEA | Vanguard FTSE Developed Markets ETF | 0.03% | $150.7B | 11.1% |
| IEFA | iShares Core MSCI EAFE ETF | 0.07% | $133.2B | 11.9% |
| VXUS | Vanguard Total International Stock ETF | 0.05% | $86.4B | 8.7% |
Top international ETF data as of April 30, 2025. Past performance is no guarantee of future results. Source: FactSet
Fixed-Income ETFs: BlackRock Likes Short-Term TIPS
Given its outlook for potentially higher inflation in 2025, BlackRock sees the optimal risk/reward balance in the fixed-income space for the year to remain in the shorter duration range, especially with inflation-protected ETFs.
In its seasonal report, BlackRock said it expects real yields to stay high and that it thinks “recent repricing higher in real rates have been overdone, and we favor inflation protection, particularly in the front-end of the curve.”
Top 3 Short-Term Inflation-Protected ETFs by AUM
| Ticker | Fund | Expense Ratio | AUM | YTD Return |
| VTIP | Vanguard Short-Term Inflation-Protected Securities ETF | 0.03% | $14.7B | 3.9% |
| STIP | iShares 0-5 Year TIPS Bond ETF | 0.03% | $11.9B | 3.8% |
| TDTT | FlexShares iBoxx 3-Year Target Duration TIPS Index Fund | 0.18% | $2.4B | 4.5% |
Top short-term inflation-protected ETF data as of April 30, 2025. Past performance is no guarantee of future results. Source: FactSet
Alternative Assets: Gold Still a Diversifier
One of BlackRock’s primary suggestions for diversification amid continued macro uncertainty is gold, as its analysis “shows that a small addition of gold in a portfolio could boost its Sharpe ratio for 1-year, 3-year, 5-year and 10-year time periods.”
Thus, while gold’s price is near all-time highs and risk of a fall from those highs exists now, it may continue to serve as a smart diversification tool.
Top 3 Gold ETFs by AUM
| Ticker | Fund | Expense Ratio | AUM | YTD Return |
| GLD | SPDR Gold Shares | 0.4% | $100.2B | 25.5% |
| IAU | iShares Gold Trust | 0.25% | $46.4B | 25.6% |
| GDX | VanEck Gold Miners ETF | 0.51% | $15.0B | 44.5% |
Top gold ETF data as of April 30, 2025. Past performance is no guarantee of future results. Source: FactSet
Diversification: The Key to Portfolio Construction in 2025
In an economic environment marked by inflationary pressures and the growing threat of a prolonged trade war, diversifying across low volatility ETFs, short-term bond ETFs and gold ETFs can offer investors a strategic defense against heightened market uncertainty.
These asset classes have historically provided stability, income and inflation protection, making them especially valuable when equity markets face downside risk and interest rate policy remains unpredictable.
While no investment is without risk, this type of balanced approach allows financial advisors and investors to position portfolios with resilience—preserving capital while maintaining exposure to potential upside if market sentiment shifts.
In times like these, diversification isn't just prudent—it's essential.
