Volatility is surging, with the VIX "fear" index climbing to its highest level so far in 2025 as of March 3. Investors have been spooked by an inverted yield curve in Treasury rates and corresponding concerns about a potential recession, as well as uncertainty surrounding tariffs by the Trump administration, dropping consumer confidence levels, and more. In the midst of these challenges, exchange-traded funds (ETFs) can be a haven and a way to diversify a portfolio to protect against headwinds.
Investors looking to expand their ETF focus in the new year might consider any number of defensive plays that aim to minimize downside risk in a tumultuous market. More adventurous investors might also use this as an opportunity to invest in underappreciated ETFs—funds that have had a strong showing so far in 2025 but which have relatively modest assets under management of $25 billion or less. These are not the most obscure ETFs available—to be sure, there are plenty with asset bases just a fraction of that level—but they are also well behind many of the most popular ETF options investors tend to gravitate toward.
