Learn more about Betterment's curated lineup of low-cost mutual funds.
Key takeaways:We’re excited to introduce mutual funds to Betterment 401(k) plans, giving you more ways to invest for your retirement goals. Our new mutual fund lineup offers a range of professionally managed options that make it easy to stay diversified. Each fund provides exposure to different parts of global stock and bond markets, giving you flexibility to build a customized portfolio—or simply choose a target date fund that automatically adjusts as you get closer to retirement. Here’s what you need to know about how these funds work and what’s available in your plan.
Please note: Your plan may use our managed ETF portfolios or a customized fund menu from a third-party advisor. Log in to see what investment options are available in your plan.
Mutual funds are professionally managed funds that pool investor dollars into a diversified portfolio of stocks, bonds, or both. They give individuals and institutions an easy way to access different parts of the global market without having to purchase each security individually. With a single mutual fund, investors can gain exposure to dozens or even hundreds of securities, helping to spread risk and simplify portfolio management. Additionally, mutual funds come in different flavors, from broad market funds (i.e. the entire international developed market) to more niche (i.e. U.S. small cap value stocks).
Mutual funds represent 65% of assets held in 401(k) plans, or over $5T, as of 2024. One type of mutual fund commonly used in 401(k) plans is the target date fund, which offers an easy, built-in way to stay diversified and prepare the investor for retirement. This fund, with its glidepath approach, automatically de-risks over time, as participants near the “target” retirement year. Asset allocation becomes more conservative as participants near retirement, with more exposure to bonds rather than stocks to preserve capital.
As your investment fiduciary, the Betterment Investing team designs, selects, and monitors the mutual funds in your 401(k) plan—making changes as needed.
To build the lineup, we review a wide range of mutual funds across the industry and group them by market type (for example, U.S. large-cap stocks or international bonds). We then evaluate funds based on cost, quality, and effectiveness, focusing on those that provide strong market exposure at a low cost. Funds with extra fees or unnecessary charges are filtered out through our internal cost of ownership review.
For target date funds, we use the same cost-focused approach while also considering additional factors, such as the glidepath. Betterment selects a cost-effective option, managed by an experienced firm that uses similar strategies to Betterment’s own glidepath.
As part of our fiduciary responsibility and oversight, Betterment monitors the funds on an ongoing basis. This consists of quarterly reviews of performance and market exposure. If the Investing team identifies a more suitable mutual fund, either from a cost, performance, or asset class exposure perspective, Betterment’s Executive Investment Committee will implement changes as necessary.
Now that you have a sense of the process Betterment takes to design, select, and monitor your mutual fund lineup, you probably want to know what is available to invest in. Today, the Betterment 401(k) mutual fund lineup consists of more than 20 index (or passive market tracking) mutual funds managed by Vanguard, Fidelity, iShares, Schwab, and State Street as well as a target retirement fund series managed by Vanguard.
More specifically, the exposures available in the mutual fund lineup are composed of:
While the above represents the methodology and exposures of the Betterment mutual fund lineup, keep in mind that your plan may have different investment options. Log in to your account to see what is available for your 401(k) plan.