Betterment has grown beyond offering just one portfolio, and there are now options to customize. It recommends a portfolio to you based on two parts- asset allocation and fund selection. It includes a combination of stocks and bonds.
Depending on your allocation of stocks to bonds, Betterment adjusts the allocation of each individual ETF to meet the efficient frontier. In plain English: Betterment has optimized the portfolio to give you the best performance possible.
Betterment Core Portfolio
Their core portfolio includes Vanguard stock and bond ETFs, including the Vanguard U.S. Total Stock Market (VTI), Vanguard U.S. Large-Cap Value (VTV), Vanguard FTSE Developed Markets (VEA), Vanguard FTSE Emerging Markets (VWO),iShares Emerging Markets Bond (EMB), iShares iBoxx $ Investment Grade (LQD), iShares Barclays Aggregate Bond Fund (AGG), iShares Barclays Short Treasury Bond (SHV) and more.
In addition to their core portfolio, Betterment also offers the BlackRock Target Income Portfolio and the Goldman Sachs Smart Beta Portfolio.
BlackRock Target Income Portfolio
The BlackRock Target Income Portfolio is a diversified 100% bond basket. Investors can choose from four risk levels, each with its own targeted level of income yield. The higher the potential income, the greater the risk.
This portfolio could be a solid choice for retirees looking for stable, dependable income as well as a way to preserve their nest eggs. It’s also a solution for investors who would like a lower-risk investment than stocks.
Goldman Sachs Smart Beta Portfolio
The Goldman Sachs Smart Beta Portfolio is designed for those in retirement or investors wanting a low-risk portfolio. The portfolio is 100% composed of bonds to give investors income with low risk. Goldman Sachs Smart Beta Portfolio seeks to outperform a conventional investing strategy using smart beta. It intends to give investors higher returns by eschewing market capitalization weightings in and across equity asset classes.
With a smart beta approach, overall market performance is considered only one of many factors that can affect investment returns. By addressing other factors, this strategy means more risk but also the potential for higher returns.
Flexible Portfolios allow users to adjust the individual asset class weights. You still receive feedback from the Portfolio Analysis tool as to the risks of your selections, but the choice will ultimately be up to you. With Flexible Portfolios, you also have access to features that can save you at tax time, such as tax-loss harvesting and tax coordination.
And these portfolios work with all account types — including Roth and Traditional IRAs. However, you need at least $100,000 invested with Betterment to use this portfolio type. It’s not valid for Betterment’s Socially Responsible Investing, BlackRock, or Goldman Sachs portfolios either.
I would still like to see some additional asset classes beyond ETFs, such as commodities and REITs. But Betterment’s philosophy is that REITs and commodities held on their own — rather than within an ETF — could overexpose your portfolio.
Socially Responsible Investing Portfolio
In addition to the three portfolios outlined above, Betterment also offers socially responsible investing (SRI). This robo advisor also allow customers to donate shares directly from their accounts to charities. This can save investors at tax time because they will avoid capital gains taxes on donated shares.
In designing its SRI portfolio, Betterment took two goals into account:
- Reducing exposure to companies involved in activities deemed irresponsible on either an environmental, social, or governmental level.
- Increasing exposure to companies that are striving to solve ecological and social challenges.
Bettement has three SRI focused portfolios:
- Broad Impact Portfolio — This includes ETFs with high ESG ratings and keeps investments balanced.
- Climate Impact Portfolio — For investors that want to make sure they’re supporting companies working to reduce carbon emissions. Includes ETFs that are focused on green investments.
- Social Impact Portfolio — This includes two ETFs that support companies empowering minorities and promoting gender equality in the workplace.
Betterment’s socially-responsible portfolio options are great for investors who want their dollars to impact the world and make sure they are investing in companies that are helping make the world a better place.
Innovative Technology Portfolio
Betterment’s Innovative Technology Portfolio includes several emerging industries such as clean energy, semiconductors, robots, virtual reality, blockchain, nanotechnology, and more. With this portfolio, you get access to a variety of high-growth potential innovation trends with increased exposure to risk.
Because innovation is constantly changing, this portfolio also refreshes regularly. It invests in new early-state innovators on a regular basis. It’s balanced across a variety of asset types to keep your portfolio diversified over the long-term.
Keep in mind that high-growth innovation stock exposure decreases with increasing bond allocation.