Betterment was one of the first robotic financial advisors, or robo-advisors, online. Since 2008, the company has been a go-to source for access to the stock market, offering various types of investment accounts from taxable accounts to retirement accounts like traditional IRAs, Roth IRAs, and 401(k)s.
Once you sign up for a Betterment account, you’ll find the brokerage offers multiple prebuilt investing portfolios to choose from. Each centers around a specific strategy.
So what are the best portfolio strategies available on the platform?
The Best Betterment Portfolio Strategies
The best Betterment portfolio strategy for you depends on your investing goals.
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Our pick for the best overall Betterment portfolio investment strategy, the Core Portfolio, caters to the largest group of investors. This portfolio is built with significant diversification, offering exposure to various corners of the stock market at a low cost, all while producing compelling gains that should satisfy most investors’ needs.
Other portfolio options listed below are geared toward specific subsets of investors. For example, socially responsible investors will want to consider the Broad Impact Portfolio, while retirees may consider the BlackRock Target Income Portfolio.
Best Overall: Core Portfolio
Whether you’re new to investing or you’ve been investing for a while and just want access to a portfolio that tracks the overall market without the headache of researching and building a portfolio of individual stocks, the Core Portfolio from Betterment is likely to be an appealing option.
This investment portfolio is the most diversified of the company’s options, offering allocation in a wide range of asset classes and regions around the world.
This general investing portfolio is the company’s flagship, built from a wide range of exchange-traded funds (ETFs), most of which are offered by Vanguard. It’s the default portfolio most of your investment dollars with Betterment go into if you don’t request otherwise. The robo-advisor is constantly adjusting and rebalancing as market conditions evolve.
Best for Beating the Market: Goldman Sachs Smart Beta Portfolio
Investment-grade funds fall into one of two categories: passive or active. Passive funds attempt to track market indexes, whereas fund managers at the helm of active funds are constantly making moves in an attempt to produce market-beating gains for their customers.
Of course, active funds are generally more risky than passive funds, so if you’re going to take the active route, it’s a good idea to mix in a few passive investments to provide stability.
That’s exactly what you get with the Goldman Sachs Smart Beta Portfolio.
The portfolio is made up of a mix of passive and active funds, offering the potential to beat the average returns of popular benchmarks like the S&P 500 and Dow Jones Industrial Average while effectively using passive funds to balance out the risk.
Although this is the best portfolio strategy offered by Betterment for investors interested in beating the market, it’s important to remember that wherever there’s potential for larger-than-average gains on Wall Street, there’s also potential for larger-than-average losses. As such, this portfolio is designed for a more risk-tolerant investor.
Best for Socially Responsible Investing: Broad Impact Portfolio
Socially responsible investing, or impact investing, is a hot trend in the stock market these days, and for good reason. Now more than ever, consumers are paying close attention to the social impacts created by the companies they choose to support.
Betterment offers three portfolio strategies for investors interested in the social impact of their investment dollars. One is focused on climate impact and green energy. The second is focused on social impact including race, gender, and sexual orientation equality. The third — the Broad Impact Portfolio — is the best of both worlds, focusing on both climate and social impacts.
The Broad Impact Portfolio only invests in funds with strong environmental, social, and governance (ESG) scores. As a result, the portfolio holds companies that are known for making a positive impact on the world, whether by powering its operations with clean energy or offering opportunities to minorities in low-income areas.
If you want to make money in the market while making the most profound difference possible using a Betterment portfolio, the Broad Impact Portfolio is the way to go.
Best for Growth Investors: Innovative Technology Portfolio
Growth investing has long been a popular strategy. It has become even more popular in recent times as stocks, particularly in the technology sector, have grown to monumental valuations.
If you’re looking to take advantage of some of the best growth opportunities on the market today, the Innovative Technology Portfolio was made just for you.
The portfolio is made up of a long list of tech-heavy ETFs and index funds, offering exposure to goliaths like Apple, Microsoft, and Facebook while also providing exposure to smaller up-and-comers in the tech sector.
The companies these funds invest in are known for producing compelling growth in revenue and profitability as well as share prices, making them gems for risk-tolerant investors interested in using volatility to their advantage.
Best for Retirees & Risk Management: BlackRock Target Income Portfolio
When you sign up for a Betterment account, you’ll be asked to set your asset allocation to determine the percentages of your portfolio you’d like to invest in stocks and in bonds.
The BlackRock Target Income Portfolio will be at the center of your bond holdings.
The portfolio is made up of nothing but fixed-income securities, ensuring you’re not exposed to the volatility of the stock market. Although the portfolio generates slow growth, it’s a strong source of income, making it the perfect option for retirees and for the safe-haven allocation of your portfolio.
Methodology: How We Select the Best Strategies
We used three key metrics when evaluating the different portfolio strategies available with a Betterment account.
We considered how well each portfolio meets the broad needs of most investors as well as how well it addresses the particular needs and goals of each individual investor. We’ve also paid close attention to each portfolio’s investment performance and the level of diversification each portfolio strategy offers.
Themed Portfolios
Although it’s important for robo-advisors to offer catch-all portfolios, there’s significant value in portfolios geared toward a specific audience or investing theme. Four out of five of our top portfolio strategies are designed for a specific type of investor, whether for socially responsible investors, income investors, or growth investors.
Diversification
Diversification is one of the building blocks of a strong investment portfolio. It’s a strategy built around the old adage, “don’t put all your eggs in one basket.”
By spreading investment dollars across a wide range of assets, investors are protected if a single asset or group of assets takes a nosedive. The portfolios listed here offer the highest level of diversification in their respective categories.
Performance
When you invest, your ultimate goal is to make money. Therefore, we used the annualized rate of return from the portfolios Betterment offers as a primary metric for deciding which portfolio strategies are best.
Keep in mind that the five strategies listed above are not necessarily the five best-performing strategies based on percentage gains.
For example, in order to address a portfolio strategy that was a strong fit for retirees, we had to consider more conservative options. That’s because retirees often give up some potential for long-term gains in exchange for addressing their need for stability and predictable income.
Betterment Portfolio Strategy FAQs (Frequently Asked Questions)
Betterment is a popular investing app and a pioneer in the field of robo-advisories. It’s only natural that potential new users might have some questions about how its products and services work. Some of the most commonly asked questions include:
Does Betterment Offer a Mobile App?
Yes, Betterment does offer a mobile app. The on-the-go application is just as intuitive as the desktop version too. Whether you want to get your investing process started while you’re on the go or simply don’t have access to a computer, the mobile app will be all you need to be effective using the platform.
Will Betterment Guide Me Toward Reasonable Investment Goals?
One of the most important aspects of investing is setting reasonable, achievable, yet challenging investing goals. Your goals should address the short, mid, and long term, and your investment plan, whether that be a real-world or digital plan, should be centered around them.
Although setting your goals may seem like a cumbersome process, Betterment handles the leg work for you.
When you sign up, you’ll be asked a series of questions, each question guiding the robo-advisor to provide the type of advice that fits your needs. Once the questionnaire is complete, you’ll be provided with a comprehensive plan, outlining how much money Betterment thinks you should contribute to your portfolio each month and the most beneficial asset allocation in terms of achieving your goals.
Of course, you have the option to make adjustments as needed, to customize the plan to fit you as well.
Does Betterment Handle Rebalancing?
Rebalancing is an important part of investing. Over time, values of some assets will move at faster rates and in different directions than others, leading to an imbalance in your portfolio that could overexpose you to risk.
Betterment investors don’t have to do the balancing act. In fact, they don’t have to rebalance anything. From time to time, the platform automatically makes adjustments to ensure your portfolio stays in balance. It’s all hands-free.
Are There Any Tax Benefits?
Whenever you make money, the government is going to want its cut. You should always make an effort to understand and reduce your tax burden when investing. Tax-efficient investing means you’ll be able to hold onto more of your gains at the end of the year.
The team at Betterment understands taxes and takes extra steps to minimize your tax burden. The company automates the process of tax-loss harvesting, using losses in some investments to offset gains in others for tax purposes.
Unlike with many other brokers, there’s no additional cost to use the tax-loss harvesting features at Betterment.
What Fees Will I Be Charged to Invest?
Betterment is a low-cost option to invest. A typical financial advisor’s fee sits at around 1% of your portfolio’s value per year. Betterment offers two plans, both with low fees well below the average cost of a traditional financial advisor:
- Digital Investing. This plan comes with a 0.25% annual fee and gives you access to all the platform’s portfolio strategies managed by a robo-advisor.
- Premium Investing. The annual management fee for a Premium Investing account is 0.40% and includes all robo-advisor features plus access to a team of certified financial planners (CFPs).
In addition to the annual fees Betterment charges, you’ll also be responsible for your share of ETF expense ratios for the investment funds you hold. A typical ETF expense ratio is 0.44%.
Is Financial Planning Available?
Although having an artificial intelligence handle your investments for you sounds great, for many people, there’s nothing like advice from a professional. Betterment provides relatively inexpensive, unlimited access to certified financial planners (CFPs) for users with the Premium Investing package.
Not only will the CFPs provide you with information on how to optimize your earnings with Betterment, they’ll give you personalized advice for your other investments held outside of the platform too.
Can I Adjust Betterment to My Risk Tolerance?
Every investor has a unique level of comfort with risk. The platform lets you adjust your portfolio to match your risk appetite. To do so, simply adjust the asset allocation.
Betterment will start you off with the asset allocation it sees fit. If you feel the allocation is too modest, increase your stock holdings. If the automatic allocation is too aggressive for you, increase your bond holdings.
Does Betterment Require a Minimum Balance?
There’s no minimum balance requirement for the company’s robo-advisory services. Whether you have $10 or $100,000, the company is happy to help you make profitable moves in the market.
If you want to take advantage of the Premium Investing option with access to a team of CFPs, you’ll need to have a minimum balance of at least $100,000.
Are Other Banking Services Available at Betterment?
Betterment is a diverse personal finance app that offers not only investing services but also other banking services.
For example, members have access to a free Betterment checking account with a debit card you can use at ATMs across the country. You’ll also have access to the free Betterment Cash Reserve savings account.
Both the checking and savings accounts have tools available to help you achieve your budgeting and savings goals.
How to Choose the Best Betterment Portfolio Strategy
When choosing which Betterment portfolio strategy you’ll use, it’s important to think about a few factors:
- How Aggressive Do You Want to Be? If you primarily want to earn income and shield your portfolio from the market’s volatility, using a strategy like the BlackRock Target Income Portfolio that’s focused on fixed-income securities is the way to go. On the other hand, if you want to reach for maximum stock market profits, a more aggressive strategy like the Goldman Sachs Smart Beta Portfolio is for you.
- Are You Content With “Average” Performance? Are you more interested in tracking the market, generating similar gains to the S&P 500, or are you interested in taking a little extra risk for the chance at bigger gains?
- What Is Your Time Horizon? If you’re investing for the long-term, you can afford to take risks. However, if you’re dependent on the funds in your investment account in the short term, you’re likely best to use a strategy that doesn’t overexpose you to the fickle ups and downs of the stock market.
- Are You Interested in Impact Investing? If you want your investments to make an impact on the world around you, a socially responsible investing strategy like the Broad Impact Portfolio may be appealing.