When you deposit money with Betterment, your money is transferred to Betterment Securities (a FINRA member broker-dealer) with instructions to buy ETFs based on your desired asset allocation between stocks and bonds (Betterment’s two investment baskets). You own shares in the stock and bond ETFs that Betterment recommends for these two baskets and Betterment manages buying and selling them for you.
Betterment maintains a small operational cash allocation in managed investing portfolios, and when there are fees, withdrawals, or other portfolio management actions in your account, that cash will generally be used first. This can reduce the need to sell securities to cover smaller transactions. The number of shares bought or sold depends on the size of your transaction, your portfolio allocation, and the cash available in your account.
Your funds are automatically invested within 1-3 business days into Betterment’s portfolio, based on our algorithm’s recommended mix of funds. You’ll receive a confirmation email that details the shares purchased, and your Betterment balance will update daily based on the market value of those shares.