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Thomas Kent
Updated Apr 9, 2026
For decades, index funds have been the gold standard for retirement investing. Cheap, diversified, and easy to manage, they’ve helped millions of Americans adopt a simple buy-and-hold strategy built around broad-market indexes.
But the world’s largest asset manager is now warning that relying on index funds alone may no longer be enough.
“There needs to be an evolution away from this being indexed only,” Nick Nefouse, global head of retirement solutions at BlackRock, said in a phone interview with Bloomberg. “The markets are evolving to a point where there needs to be more oversight.”
BlackRock says rising market concentration, geopolitical volatility and longer retirements are forcing investors to rethink their traditional portfolios.
According to BlackRock, the next generation of retirement investing may look very different from the classic strategy of simply buying an S&P 500 index fund and waiting.
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Why BlackRock thinks the index-only strategy is breaking down
BlackRock argues several trends are reshaping the investing landscape.
One of the biggest is market concentration. In recent years, a handful of large technology companies have accounted for an outsized share of stock market gains, leaving major indexes increasingly top-heavy.
At the same time, global volatility has increased. Geopolitical tensions, inflation cycles and interest-rate uncertainty have created more unpredictable market conditions.
Another challenge is longevity risk. The average American’s life expectancy is 79 years. As retirees live longer, their portfolios may need to generate income for decades.
Instead of focusing solely on building a nest egg, BlackRock says investors may need portfolios designed to deliver a steady stream of income — a potential shift toward a “paycheck for life” model in retirement.
One place institutional investors have long looked for that kind of consistent income is real estate.
Real estate accounts for about 25% of the average family office portfolio, according to UBS Global Family Office Report.
Today, new investment vehicles are making it easier for everyday investors to gain exposure to the asset class — even without buying a property outright.
For instance, the Fundrise Flagship Fund¹ is a $1 billion private real estate fund that lets you invest in an expertly crafted strategy without needing hundreds of thousands of dollars. You don’t need to be an accredited investor, and you can get started with as little as $10.
With 4,700+ single-family homes and 2,500+ residential units owned by the Fundrise Flagship Fund, you get exposure to institutional-style scale and diversification.
Industrial
215 Interchange
Las Vegas, NV
Build-for-rent
Pine Ridge
Fountain Inn, SC
Build-for-rent
Omnia
Richmond Hill, GA
These are a few examples of properties powering the Fundrise Flagship Fund. For a full list of the Fundrise Flagship Fund's portfolio properties see the Flagship Fund website
After you place your first investment, the Fundrise Flagship Fund will work to find and add new assets to your portfolio over time and send you transparent updates along the way.
It only takes a few minutes to sign up now and become a real estate investor today.
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Buy real estate through Fundrise's $1 billion private fund
For accredited individuals, platforms such as Lightstone DIRECT, which gives you access to single-asset multifamily and industrial deals.
Lightstone DIRECT lets individual investors tap into the institutional approach of Lightstone, one of the largest privately held real estate investment firms in the U.S., with $12 billion in assets under management.
Featured
Residential
Columbus, OH
Featured
Industrial
Tobyhanna, PA
Featured
Residential
Beverly Hills, MI
These are a few examples of past properties or acquisitions from Lightstone. Explore more investment opportunities when you register with Lightstone DIRECT.
The platform eliminates middlemen and the extra layers of fees that can add up in traditional real estate investing, usually known as “fee stacking.” This streamlined approach provides more direct access to institutional-quality deals.
Over nearly four decades, Lightstone has delivered strong risk-adjusted performance — including a 27.6% historical net IRR and a 2.54x historical net equity multiple on realized investments since 2004.
Each opportunity requires a $100,000 minimum and undergoes a rigorous review by Lightstone’s principals, including founder David Lichtenstein.
Lightstone also invests at least 20% of its own capital in every deal — roughly four times the industry average. With skin in the game, the firm ensures its interests are directly aligned with those of its investors.
More: 4 ways to invest in real estate in 2026
The big shift: private markets inside retirement accounts
One of BlackRock’s proposed solutions is to expand access to private-market investments within retirement plans.
The firm has suggested that future target-date funds could include assets such as private credit, infrastructure investments and private equity alongside traditional stocks and bonds.
Private markets have grown rapidly in recent years. Global private equity assets alone reached about $9.9 trillion, as of October 2025 (5).
Bloomberg’s reporting suggests that BlackRock is exploring retirement products that incorporate these types of investments, potentially bringing institutional-style assets into everyday portfolios.
The shift could benefit asset managers
Not everyone is convinced the move away from index-only portfolios is purely about improving outcomes for investors.
Index funds often charge just a few basis points in annual fees. Actively managed funds and alternative investments typically carry higher fees — a difference that can significantly impact returns over time for the average investor.
Expanding active management could also benefit asset managers themselves, since active funds typically charge higher fees than passive index trackers. Research from Vanguard has found that most actively managed funds fail to outperform comparable index funds about 83% of the time over a 15-year period after fees.
The performance gap is mostly attributable to the cost difference between the two. Index funds typically charge 0.03%-0.2% in fees, whereas actively managed funds costs 0.5%-1.5% or more.
Over time, even small fee differences can compound dramatically. For example, a $100,000 portfolio earning 7% annually for 30 years could grow to about $739,000 with a 0.1% fee (a net return of 6.9%), but only $574,300 with a 1% fee (a net return of 6%). That’s a $164,700 difference, driven entirely by costs.
Princeton economist Burton Malkiel, author of the investing classic A Random Walk Down Wall Street, makes similar arguments in his book, writing that “two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk.”
That said, the equation can look different for higher-net-worth investors or those who have built up a sizable retirement portfolio over decades.
For those with more complex financial situations, working with a financial advisor may offer benefits that go beyond simple fund selection — including tax optimization, portfolio construction, and hedging strategies designed to manage risk across market cycles.
Platforms like Advisor.com take the guesswork out of finding this expertise.
Platforms like Advisor.com take the guesswork out of finding this expertise.
Just indicate what you need help with — like tax optimization, retirement planning, or budgeting — answer a few quick questions through their online form and the platform will match you with a vetted financial advisor in 5 minutes.
You can set up a free, no-obligation-to-hire call to see how they can help you create an actionable plan and whether their approach and pricing model make sense for you.
What does that mean for everyday investors?
The takeaway isn’t that index funds suddenly stopped working. They still work as the foundation of a long-term portfolio, particularly for younger investors.
But as markets become more concentrated and retirement stretches longer, 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 alongside stocks and bonds. One model gaining attention is a 50/30/20 allocation — 50% stocks, 30% bonds and 20% alternative investments.
That shift is one reason investors are experimenting with ways to add nontraditional assets to their investments.
Find the right uncorrelated asset
“It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months.”
That’s according to Goldman Sachs CEO David Solomon, speaking at the Global Financial Leaders' Investment Summit in November 2025.
Meanwhile, the Shiller P/E has just soared past 40x, a level last seen in 1999, hinting that the decade ahead may bring below-average returns for those tied to the S&P 500.
With these warning signs, diversification isn’t just smart — it’s essential. 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 behave differently from the market.
One standout example: post-war and contemporary art, which outpaced the S&P 500 by 15% from 1995 to 2025 while showing near-zero correlation to traditional equities.
Until recently, this world was off-limits. Now, with Masterworks, you can buy fractional shares in multimillion-dollar works by icons like Banksy, Picasso and Basquiat. While art can be illiquid and typically requires a long-term hold, it can offer unique portfolio diversification.
This chart illustrates how the Artprice100 index, which tracks the financial performance of the world’s 100 most successful blue-chip artists, has consistently outpaced the S&P 500 since 2000. Learn how you can invest in art with Masterworks.
Masterworks has sold 25 artworks so far, yielding net annualized returns like 14.6%, 17.6%, and 17.8%.*
Moneywise readers can get priority access to diversify with art: Skip the waitlist here
*Past performance is not indicative of future returns. Investing involves risk. See important Regulation A disclosures at Masterworks.com/cd
Gold as a hedge
Gold has served as a store of value for thousands of years. It’s become a key player in diversified portfolios nowadays. More recently, research from the World Gold Council has shown that adding a small allocation of gold to a portfolio can help improve risk-adjusted returns.
During periods of high inflation or financial instability, the metal has historically served as a hedge against currency depreciation and market volatility.
One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.
This chart shows the price of gold over the past five years. If you want to see whether opening a precious metals IRA is the right investment to diversify your portfolio, download a free info guide.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.
If you’d like to convert an existing IRA into a gold IRA, Priority Gold offers 100% free rollover, as well as free shipping, and free storage for up to five years. Qualifying purchases will also receive up to $10,000 in free silver.
To learn more about how Priority Gold can help you reduce inflation’s impact on your nest egg, download their free 2026 gold investor bundle.
The bottom line
BlackRock’s message isn’t necessarily that index investing is broken, nor should investors consider it to be. 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 retirement gets longer, the world’s largest asset manager is betting that investors will increasingly need to look beyond tradition to keep afloat.
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Thomas Kent
Senior Staff Writer
Thomas Kent is a Senior Staff Writer at Moneywise, covering personal finance, investing, and economic trends. He previously reported on business and public policy in Ontario and has written extensively about insurance, taxes, and wealth-building strategies.
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