With 2025 off to a rocky start, many investors may be looking for opportunities to adjust their portfolios.
If you’re a long-term investor, the time to reevaluate your asset allocation or risk tolerance is generally not in the middle of a bout of volatility—as investors can be vulnerable to short-term reactive decision-making. If you have a plan you’re comfortable with, there’s no need to take action now.
That said, markets are exhibiting some different behaviors of late, and after a long period of leadership by a narrow group of high-growth US stocks, a variety of segments have been looking attractive from a valuation standpoint. Some could also offer diversification benefits or defensive attributes, particularly for investors who might have sizeable exposure to mega-cap US growth stocks.
Here are 5 investing opportunities to consider now.
1. Diversification: Dividend stocks
The recent drop in the S&P 500® Index has been led by the same handful of technology and communications services stocks that had fueled the S&P’s big rise over the past few years. Those stocks are few in number, but they now make up roughly 40% of the value of the index, which means they can have an outsized impact on the direction of the market as a whole—pushing it down sharply as well as up.
If you seek a smoother ride from your stock portfolio, consider diversifying with stocks that have reasonable prices and that also make regular dividend payments to shareholders.
You can gain exposure to divided-paying shares in 3 primary ways:
- Separately managed accounts (SMAs): The managers of these portfolios aim to achieve lower volatility than the S&P 500 while still seeking long-term growth and dividend income.
- Individual dividend-paying stocks: It may be advantageous to invest in a variety of stocks from sectors rather than concentrating on those with relatively high dividends, such as consumer staples and energy.
- Actively managed ETFs and mutual funds: Professional managers may be able to identify companies that are likely to increase their dividends and avoid those likely to cut them.
Fidelity customers can search for individual dividend-paying stocks using the Fidelity Stock Screener . Or, to search for mutual funds or ETFs that focus on dividend-paying stocks, investors can use the Fidelity Mutual Fund Research tool or ETF Screener .
2. Diversification: International stocks
US stocks have enjoyed a long period of outperformance over international stocks, leading to relatively high valuations compared with the rest of the world.
Periods of outperformance can last a long time, but they typically don’t last forever. So far, 2025 looks like it could be the year when international stocks start making up for lost ground—with shares from European and Chinese companies already notching double-digit gains for the year, as of mid-March.
“All of a sudden Europe is coming to life this year,” says Jurrien Timmer, Fidelity’s director of global macro. “This has been fueled by geopolitics as well as the German election, leading to the prospect of a boost from fiscal spending as Europe beefs up its defense and infrastructure.”
Of course, past performance is no guarantee of future results, and it’s impossible to know if recent performance trends will continue. But investors who have grown under-allocated to international stocks over time could consider rebalancing their exposure.
To search for mutual funds or ETFs with an international focus, investors can use the Fidelity Mutual Fund Research tool or ETF Screener .
3. Defense: Treasury Inflation-Protected Securities (TIPS)
Adding bonds to a portfolio of stocks is a popular way to manage the risks of losing money, because historically the prices of stocks and bonds have not always risen and fallen at the same time. The drawback of bonds is that inflation can reduce the value of the interest payments that most bonds make, which do not change whether inflation is high or low.
To help reduce the risk that inflation poses to bondholders, the US Treasury created Treasury Inflation-Protected Securities (TIPS) in 1997. These are bonds whose principal and interest payments are designed to rise when inflation does. They are available in 5-year, 10-year, and 30-year maturities. TIPS' yields are based on their current amount of principal. When inflation rises, the principal of TIPS adjusts higher, and the payments go up along with it. That means you can still get the diversification benefits of bonds without having to worry about the threat of inflation. Here’s how they work:
Investors interested in diversifying their portfolios with TIPS can choose from individual bonds, mutual funds, or exchange-traded funds. The approach you choose should reflect your ability and interest in researching your investments, your willingness to track them on an ongoing basis, the amount of money you have to invest, and your tolerance for various types of risk.
4. Defense: Minimum volatility ETFs
Volatility has increased lately as measured by the CBOE Volatility Index (most commonly known by its ticker, “the VIX”), which aims to measure the 30-day expected volatility of the US stock market.
There are a variety of investment vehicles that attempt to manage exposure to volatility, including minimum volatility ETFs, minimum volatility mutual funds, low volatility managed accounts, and options-based ETFs.
Looking at “min vol” ETFs specifically, these are funds that attempt to reduce exposure to volatility by tracking indexes that aim to provide lower-risk alternatives to other riskier investments. For example, a min vol ETF might exhibit less risk during market turbulence compared with a broadly diversified index such as the S&P 500.
To search for min vol ETFs, investors can use the Fidelity Mutual Fund Research tool or ETF Screener.
5. Opportunity: Small-cap biotech
This volatile market segment tends to go through boom-and-bust cycles. After the miraculously rapid development of COVID-19 vaccines in 2020, money poured into biotech ventures. However, the industry fell out of favor in the ensuing years as interest rates rose, which sharply increased the cost of capital for these research- and cash-intensive businesses.
That down-and-out period has brought the industry to “a historically cheap valuation trough,” says Rajiv Kaul, who has managed Fidelity® Select Biotechnology Portfolio (
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To be sure, biotech isn’t for the faint of heart. Many small-cap biotech companies are not profitable. And for every successful new therapy, there may be many more that fail during clinical trials. That’s why even sophisticated investors may want to leave stock picking to the pros.
But for those who understand and are comfortable with the risks, says Kaul, “this could prove to be an excellent time to invest in biotech.”