Historical Performance Calculations and Presentation Methodology

Disclosures

Data and Performance returns shown are for illustrative purposes only.  Though we have made an effort to closely match performance results shown to that of the Betterment Portfolio over time, these results are entirely the product of a model, including the results from when we began operations in 2010 to the present day. Actual individual investor performance has and will vary depending on the time of the initial investment, amount and frequency of contributions, intra-period allocation changes and taxes.  Additionally, this tool illustrates past performance of the Betterment portfolio, but is not and cannot be indicative of future results.

The Betterment Portfolio is comprised of Exchange Traded Funds (ETFs) which are each similar to a number of common equity and bond indices.  Model results and volatility of the Betterment Portfolio over a given timeframe are likely to be similar to a comparable blend of these indices, but it is possible that the Betterment Portfolio would have performed better or worse than the comparable blend of indices.  These differences may be due to, but are not limited to, portfolio rebalancing, dividend reinvestments, fees and the impact of market conditions on Betterment’s advice.

Please also see our Terms and Conditions.

Historical Portfolio Composition

The Betterment portfolio is currently comprised of 12 ETFs, six stock and six bond. (More details can be found on our portfolio page).

The Betterment Analysis Tool allows a user to specify an allocation between “stocks” and “bonds”.  This choice corresponds to particular weighting of the underlying ETFs.  As an example, if 80% stocks (20% bonds) is chosen, this will be equivalent to 7% AGG, 3% LQD, 7% BNDX, 3%VWOB, 15% VTI, 15% IVE, 5% IWS, 4% IWN, 34%, VEA, and 8% VWO.

Returns and Performance

Betterment was founded in 2008, and our first investment of client funds was in 2010.  In order to show performance of the portfolio prior to 2010, we use the returns history of the same ETFs to exactly mimic how Betterment would have performed.  For time periods prior to the existence of each ETF, we use the returns of the best benchmark or proxy index for that ETF available at that time.  Proxy benchmark index choices are based on the correlation of the ETF and the benchmark during the time they both existed.  In some cases, multiple benchmarks are used depending on the best available at each point in time.  The price level of the benchmark was scaled to match that of the ETF at the switch point by taking the average ratio of the ETF and benchmark levels over the time they both existed.  While we believe this methodology results in a portfolio that was most similar to the Betterment Portfolio prior to it’s existence, it is not, and cannot be, completely precise.

The proxy benchmarks used and switch dates are as follows:

Stocks:

Ticker ETF Name Proxy* Switch Date
VTI Vanguard Total Stock Market Russell 3000 Index 6/1/2001
IVE iShares S&P 500 Value Index Russell 3000 Index 6/1/2000
VEA Vanguard MSCI EAFE Europe Pacific EAFE Index 8/1/2007
VWO Vanguard MSCI Emerging Markets EM Index 4/1/2005
IWS iShares Russell Midcap Value Index Russell Midcap Value Index 9/4/2001
IWN iShares Russell 2000 Value Index Russell 2000 Value Index 8/1/2000

 

Bonds:

Ticker ETF Name Proxy* Switch Date
SHV iShares Short-term Treasury Bond Index ETF 3-Month Treasury Bill Rate (TB3MS) 1/15/2007
VTIP Vanguard Short-term Inflation-Protected Treasury Bond Index ETF Vanguard Index data 11/1/2012
AGG iShares US Total Bond Market Index ETF Barclays Aggregate Index Data 11/1/2003
LQD iShares Corporate Bond Index ETF iBoxx Index Data 9/1/2002
BNDX Vanguard Total International Bond Index ETF Vanguard Index Data 7/1/2013
VWOB Vanguard Emerging Markets Government Bond Index ETF Vanguard Index Data 7/1/2013

 

* ETF and Benchmark Proxy Index Data Sources:
All returns series start in June 1995.
ETF Data Source (SHY, VTIP, AGG, LQD, BNDX, VWOB, VTI, IVE, IWS, IWN, VEA, VWO): xignite.com
Russell 3000 Index, Russell Midcap Value Index, Russell 2000 Value Index (Total Return): Russell Website
EAFE Index, EM Index (Total Return): MSCI Website
Barclays Capital Indices (Total Return):  Barclays Capital Website

Performance Calculation

  • Performance Returns are calculated using the Time-Weighted Rate of Return methodology that adjusts for external cash flows
  • Performance of ETFs and Benchmark Indices includes the re-investment of dividends, which is the default behavior of the Betterment Portfolio.
  • Unless otherwise stated, performance is net of the current maximum Betterment fee of 0.35%, which is charged quarterly, based on the average balance over the quarter.  Underlying ETF fees are included in the prices for the times they existed, but benchmark proxies do not include any underlying fees.
  • Monthly contributions are assumed to be made at the end of the month, and made in the same allocation as the user selection.