Core Portfolio Disclosure

Updated January 2, 2024

Betterment offers its Core portfolio strategy (“Core”) to clients who wish to invest in a model portfolio composed of stock and bond allocations of broadly diversified, low-cost exchange traded funds (“ETFs”) that seek broad-market equity and bond exposures. 

The Betterment Core portfolio strategy is made up of asset classes that categorize the types of global market exposure included in the portfolio strategy and relies on ETFs to represent each asset class. ETFs selected for the Betterment Core Portfolio strategy are issued by a number of different fund providers and are selected based on Betterment’s investment selection process, which evaluates ETFs for inclusion based on cost to trade and cost to hold the funds. As with every portfolio strategy that Betterment offers, Betterment has the discretion to choose which specific ETFs to purchase or sell to further your investment objectives, as well as when to place trades for those ETFs. The particular ETFs used in the Core portfolio are subject to change based on Betterment’s evaluation of the total annual cost of ownership of ETFs representing exposure to each asset class, among other factors. Read more about Betterment’s ETF selection process.

The Betterment Core Portfolio Strategy is comprised of the following asset classes: U.S. equities, international developed market equities, emerging market equities, U.S. short-term treasury bonds, U.S. inflation protected bonds, U.S. investment grade bonds, U.S. municipal bonds, international developed market bonds, and emerging market bonds. The Core portfolio strategy is designed with 101 allocations corresponding to risk tolerance levels (ranging from 0% stocks to 100% stocks) to deliver diversified portfolios that seek to maximize risk-adjusted returns.  A target allocation for a particular risk tolerance level is the specific set of asset classes and the relative distribution among those asset classes in which the portfolio will be invested. 

The Betterment Core Portfolio Strategy relies on a “benchmark-aware” portfolio construction methodology. The custom benchmark is composed of (1) the MSCI All Country World index, (2) the Bloomberg Global Aggregate Bond index, and (3) at lower risk levels, the ICE US Treasury 1-3 Year Index. The Core Portfolio’s custom benchmark is composed of 101 risk levels, which correspond to the 101 risk level allocations in the Core Portfolio. At lower risk levels (allocations representing more than 60% bonds), Betterment incorporates an allocation to the ICE US Treasury 1-3 Year index, which represents short-term treasury bonds, into the blended benchmark. While Betterment endeavors to limit performance deviations from the benchmark, Core portfolio performance may deviate from the returns of the targeted benchmark. 

The Betterment Core portfolio contains broad exposures to equities asset classes designed to similarly track the MSCI All Country World index, as opposed to containing concentrated exposures in favor of a specific factor exposure, ie. growth stocks or value stocks. This broad exposure to global equities is believed to align with the risk and return expectations of a variety of clients and financial situations. However, performance returns may vary and performance is not guaranteed. Betterment does not seek to take on additional risk in effort to outperform the global market benchmark.

Investors considering the Betterment Core portfolio should understand how it operates with Betterment’s automated portfolio management and tax management features. 

With respect to portfolio management, Betterment’s Core portfolio is compatible with automatic dividend reinvestment, automatic rebalancing, and auto-adjust allocation features. Investing portfolios, including the Core portfolio, require a portfolio minimum balance in order for a rebalancing transaction to occur (which can be the aggregate of balances in a tax-coordinated portfolio); see Betterment’s portfolio minimum disclosures for further details. If your investing portfolio balance exceeds the required minimum, Betterment will perform automated rebalancing to correct drifts in allocations, aligning back to the target weights. If you have enabled auto-adjust, the Core portfolio will automatically modify your allocations towards more conservative levels as you approach your goal time horizon. Read more about Betterment’s auto-adjust feature.

With respect to tax management features, Betterment’s Core portfolio is compatible with Tax Loss Harvesting+ and Tax-Coordinated Portfolios. Betterment typically implements its tax loss harvesting feature by shifting allocations among three ETFs in each sub-asset class. Electing the Core portfolio for one or more goals in your account while simultaneously electing a different portfolio strategy for other goals in your account may reduce opportunities to harvest losses due to wash sale avoidance. For more information on Betterment’s tax features and advice, please refer to Betterment’s Tax Loss Harvesting+ Disclosure and Tax-Coordinated Portfolio Disclosure