2026 is off to a volatile start for markets, with geopolitics a bigger factor than ever. The U.S. Iran War has upended whatever predictions markets may have had entering the new year, following a previous U.S. intervention in Venezuela. With unpredictable events seemingly on the rise, investors may wonder what their portfolios need now.
See more: Report: Active ETFs Topped $2 Trillion in Global AUM in January
With passive, market cap-weighted indexes seeing a lot of chop, it may be worth considering active investing options. Active investing provides some important benefits amid market volatility for investors to consider. Passive funds must track their index with fidelity, even as certain stocks within the index face turbulence. Active funds, by contrast, have some key benefits.
U.S. Iran War and Volatility: Active ETFs Can Help
For one, active ETFs can flexibly move in and out of their holdings if events require. Certain areas may open up to opportunities — like defense and energy names — while others like tech and especially AI-related tech could see turbulence this year.
What’s more, active funds also often heavily rely on fundamental research. That can help them find gems in domestic and foreign equities that market-cap, rules-limited funds can’t. Especially as volatility looms, finding companies with fundamental advantages like cash flow, durability, and more can really help.
Active ETFs have become a bigger and bigger part of the ETF ecosystem in recent years, adding a third wrinkle: tradability. The ETF wrapper allows investors to dip in and out as needed, thanks to the ETF creation and redemption mechanism. That can allow investors to toggle exposures for periods in which active funds can stand out.
The T. Rowe Price Value ETF (TVAL ), for example, can help add some active value exposure which may help in turbulent times. By emphasizing value names that may already be underrated and potentially more durable with an active approach, it offers an example of the kind of portfolio alternative that can help as a U.S. Iran war impact grows.
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