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For decades, index funds have been the gold standard for retirement investing. Inexpensive, diversified, and easy to manage, they have helped millions of Americans choose a simple buy-and-hold strategy around broad market indices.
But the world’s biggest asset manager is now warning that relying on index funds alone may no longer be enough.
“It needs to be removed from the index,” Nick Nefus, global director of retirement solutions at BlackRock, said in a phone interview with Bloomberg (1). “Markets are evolving to a point where more oversight is needed.”
BlackRock says rising markets, geopolitical instability and longer retirements are forcing investors to rethink their traditional portfolios.
The firm manages more than $14 trillion globally (2), with more than $5 trillion in ETF assets through its iShares platform (3).
According to BlackRock, the next generation of retirement investing may be very different from the classic strategy of simply buying an S&P 500 index fund and waiting.
BlackRock argues that several trends are reshaping the investment landscape.
One of the biggest is market focus. In recent years, a few large technology companies have accounted for a large portion of the stock market’s gains, with major indexes increasingly higher.
At the same time, global instability has increased. Geopolitical tensions, cycles of inflation and interest rate uncertainty have created more unpredictable market conditions.
Another challenge is the risk of longevity. The average American life expectancy is 79 years (4). As retirees live longer, their portfolios may need to generate income for decades.
Rather than focusing solely on building a nest egg, BlackRock says investors may need a portfolio designed to deliver a steady stream of income — a potential shift to the “pay for life” model in retirement.
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One of BlackRock’s proposed solutions is to expand access to private market investments in pension plans.
The company has suggested that future target date funds could include personal credit, infrastructure investments and private equity in addition to traditional stocks and bonds.
Private markets have grown rapidly in recent years. Global private equity assets alone have reached approximately $9.9 trillion by October 2025 (5).
A Bloomberg report suggests that BlackRock is exploring retirement products that include such investments, potentially bringing institutional-style assets into everyday portfolios.
Not everyone is convinced that simply moving away from index portfolios is about improving results for investors.
Index funds often charge only a few basis points in annual fees. Actively managed funds and alternative investments typically have higher fees—a difference that can significantly affect returns over time for the average investor.
The expansion of active management can also benefit asset managers themselves, as active funds typically charge higher fees than passive index trackers. Vanguard research found that most actively managed funds failed to outperform comparable index funds about 83% of the time over a 15-year post-fee period (6).
The performance gap is mostly attributed to the cost difference between the two. Index funds typically charge 0.03%-0.2% in fees, while actively managed funds charge 0.5%-1.5% or more (7).
Over time, even small fee differences can add up dramatically. For example, a $100,000 portfolio earning 7% annually for 30 years could grow to $739,000 with 0.1% fees (6.9% net return), but only $574,300 with 1% fees (6% net return). That’s a difference of $164,700, driven entirely by costs.
Princeton economist Burton Malkiel, author of the investment classic A random walk down the wall streetmakes similar arguments in his book, writing that “two-thirds of professionally managed funds are regularly exposed to equity risk equal to that of a broad investment-weighted index fund (8).”
The takeaway isn’t that index funds will suddenly stop working. They still serve as the foundation of long-term portfolios, especially for younger investors.
But as markets become more concentrated and retirements lengthen, investors may want to look beyond the traditional 60/40 stock and bond mix. No matter who benefits most from the move, diversification is the key to protecting yourself from market volatility.
For example, some investors are exploring new portfolio frameworks that include alternative assets besides stocks and bonds. A model worth considering is a 50/30/20 allocation – 50% stocks, 30% bonds and 20% alternative investments.
This change is one reason investors are experimenting with ways to generate income or add unconventional assets to their investments.
Here are a few options to consider:
Institutional investors have relied heavily on the real estate sector for years. Real estate makes up about 25% of the average family office portfolio, according to the UBS Global Family Office Report (9).
It’s easy to see why. In addition to potential price appreciation, rental properties can generate steady income.
Today, new investment platforms make it easy for everyday investors to get exposure to asset classes – without even buying property.
You can invest in vacation homes or rental property shares by entering this market.
Backed by world-class investors including Jeff Bezos, Arrival allows you to invest in vacation and rental property shares, earning a passive income stream without the extra work that comes with owning your own rental property.
To get started, simply browse through their selection of appraised properties, each selected for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning quarterly profits.
Once you’re an investor with Arrival, you’ll have access to their newly launched quarterly secondary market, where investors can buy and sell shares of individual rental and vacation rental properties directly on the platform.
This allows you to buy properties that you may have missed out on in the initial offering or sell shares before the property expires.
With access to more than 400 properties in 60 cities, this new way to trade real estate offers flexibility and opportunities to access more properties every quarter.
For investors interested in a similar approach but focusing on institutional quality rental housing, other platforms are also emerging.
One example is Mogul, a real estate investment platform that offers fractional ownership in blue-chip rental properties. Their system gives investors monthly rental income, real-time appreciation and tax benefits – without the need for a huge down payment or 3am tenant calls.
Founded by former Goldman Sachs real estate investors, the mogul team selects the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in basic quality offerings at a fraction of the normal cost.
Each property goes through an appraisal process that requires a minimum return of 12% even in downside scenarios. Across the board, the platform offers an average annual IRR of 18.8%. At the same time, the yield of their cash, on average from 10 to 12% per year. Offerings often sell within three hours, investments are usually between $15,000 and $40,000 per property.
Each investment is secured by real assets, not depending on the platform’s capabilities. Each property is held in a single Propco LLC, so investors own the property – not the platform. Blockchain-based distribution adds a layer of security, ensuring a permanent, verifiable record of each share.
Getting started is quick and easy. You can sign up for an account and then search for available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.
“It is likely that equity markets will fall 10 to 20% sometime in the next 12 to 24 months.”
This is according to Goldman Sachs CEO David Solomon, speaking at the Global Financial Leaders Investment Summit in November 2025.
Meanwhile, Shiller’s P/E just surpassed 40x, a level last seen in 1999, indicating that the next decade could bring below-average returns for those linked to the S&P 500.
With these warning signs, diversity isn’t just smart—it’s necessary. Billionaires like Jeff Bezos and Bill Gates continue to invest heavily in stocks, but they also allocate a portion of their portfolios to assets that diverge from the market.
A prime example: postwar and contemporary art, which outperformed the S&P 500 by 15% from 1995 to 2025 while showing almost zero correlation with traditional equities.
Until recently, this world was limited. Now, with Masterworks, you can buy partial shares in multi-million dollar works by icons like Banksy, Picasso and Basquiat. While art can be volatile and usually requires long-term holding, it can offer unique portfolio diversification.
Masterworks has so far sold 25 artworks that give net annual returns of 14.6%, 17.6%, and 17.8% on assets held for more than one year.
Even better, paid readers can get priority access to diversify with art: skip the waiting list here
Remember that past performance is not indicative of future returns. Investments are risky. See Important Rules A Disclosure at Masterworks.com/cd
Gold has served as a store of value for thousands of years. It has become a key player in a diversified portfolio today. Recently, research by the International Gold Council has shown that adding a small gold allocation to a portfolio can help improve risk-adjusted returns (10).
During periods of high inflation or financial instability, metal has historically served as a hedge against currency appreciation and market volatility.
One way to invest in gold while also providing significant tax benefits is to open a gold IRA with preferred gold.
Gold IRAs allow investors to hold physical gold or gold-related assets in a retirement account, which combines the tax benefits of an IRA with the protective benefits of gold investments, making them an attractive option for those potentially hedging their retirement funds against economic uncertainty.
For more information, you can get a free information guide that includes details on how to get $10,000 in free silver on qualifying purchases.
BlackRock’s message is not necessarily index investing broken downNor should investors consider it. But amid rising costs and market volatility, the retirement landscape is changing.
For decades, passive index investing has helped millions of Americans build wealth. They still can. But as markets grow more complex and retirements lengthen, the world’s largest wealth manager is betting that investors will increasingly need to step outside the norm to protect themselves.
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Bloomberg (1); Black Rock (2); Investment Executive (3); AHA (4); Okoryan (5); Vanguard (6); Use advice (7); good readings (8); UBS (9); WGC (10)
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
