Our portfolio of investments

Building on decades of Nobel-prize winning research, we invest to achieve the best investor returns possible. Investor returns represent the growth in your wealth after accounting for taxes, fees, risk, and cash flows.
Betterment's portfolio is maximally diversified, and comprises low-cost, liquid, index-tracking, exchange-traded funds, or ETFs. We use tax-efficient algorithms to automate optimal behavior and maximize your ability to grow your money.

Our investments


An optimal allocation tailored for you

When you deposit money with Betterment, every dollar is seamlessly invested in up to 12 different ETFs, optimized for your selected asset allocation.

Stock and bond ETFs are optimally weighted to provide a progressively increasing amount of risk and potential return.  Lower risk portfolios have more short-term government-backed bonds and less volatile stocks.  Short-term government bonds exit the portfolio above 42% stocks.  As you move up the allocation spectrum, we introduce bonds and stocks with higher risk but higher potential returns.  

How we picked the funds

Each ETF has been selected to balance considerations of low cost and high liquidity as a means to access each asset class. When making the selection for each ETF, we considered the following: expense ratio, bid-ask spread, assets under management, number of holdings, exchange rate hedging, and capital gains implications.

Stock ETFs


Our portfolio includes six stock ETFs that efficiently capture the broad U.S. stock market, and international developed and emerging markets. Your money is invested in literally thousands of companies instantly. Exactly how much of your portfolio is made up of which stocks depends on the exact allocation you choose. Our stock ETFs include:

  • US Total Stock Market
    With this asset class you own a piece of more than 3,600 stocks, which make up all the publicly investable companies in the U.S. economy.

    Vanguard U.S. Total Stock Market Index ETF (VTI)

  • US Large-Cap Value Stocks
    In line with Nobel-prize winning research that shows that value stocks earn a premium over time, we slightly overweight 356 value stocks from the S&P500.

    iShares S&P 500 Value Index ETF (IVE)

  • US Mid-Cap Value Stocks
    This diversified investment of 529 mid-cap U.S. stocks allows us to continue to slightly overweight value stocks in our portfolio, and give slightly more mid-cap exposure.

    iShares Russell Midcap Value Index ETF (IWS)

  • US Small-Cap Value Stocks
    This ETF of 1,360 small-cap value U.S. Stocks allow us to deliver a slightly higher expected return over long periods of time.

    iShares Russell 2000 Value Index ETF (IWN)

  • International Developed Stocks
    This investment includes 1,300 international developed stocks like BP, Nestle, and BMW, which are listed on international exchanges. We benefit from overseas growth and diversify our portfolio.

    Vanguard FTSE Developed Market Index ETF (VEA)

  • Emerging Market Stocks
    This diversified index of 922 companies captures growth in small but expanding markets such as Brazil, India, and China. This delivers more diversification, and means we can reach higher expected return levels.

    Vanguard FTSE Emerging Markets Index ETF (VWO)

Click each ETF's ticker symbol to download prospectus

Why these stock ETFs?

Our U.S. exposure covers the total U.S. market with a slight tilt towards value and small-cap stocks. The value and small-cap tilt has tended to beat the market in the long term, based on research by Nobel-prize winner Eugene Fama and Kenneth French.

By adding international stocks, we benefit from growth overseas in developed markets, including the U.K., Japan, and Europe, and achieve the same expected return with lower risk. With the emerging market stock ETF, we can capture growth in small but expanding markets such as Brazil, India, and China. This further diversifies our portfolio, and means we can reach higher expected return levels, especially at higher risk allocations.

Bond ETFs


Our portfolio includes six bond ETFs that allow us to precisely manage the level of risk at every allocation, and improve the risk-adjusted performance of the portfolio at higher risk levels. The exact amounts of each bond ETF will depend on the allocation you choose. Our bond ETFs include:

  • Short-Term Treasuries
    This ETF is made up entirely of very short-term Treasuries, with an average maturity of five months. Similar to what a money-market fund holds, it functions much like cash in a portfolio.

    iShares Short-Term Treasury Bond Index ETF (SHV)

  • Inflation Protected Bonds
    We use this index to hedge against inflation risk with precision. These bonds have an average maturity of 2.5 years.

    Vanguard Short-term Inflation-Protected Treasury Bond Index ETF (VTIP)

  • US High Quality Bonds
    Comprised of more than 2,050 high-quality U.S. bonds, this index represents a large part of global capital markets. These bonds are issued primarily by the government and other highly rated issuers, and tend to have very low default rates.

    iShares US Total Bond Market Index ETF (AGG)

  • US Investment Grade Bonds
    With bond issues from more than 1,000 major U.S. companies, this index has higher expected returns but also higher risk. Bonds issued by companies have a higher credit risk (i.e. risk of default) than government bonds.

    iShares Corporate Bond Index ETF (LQD)

  • International Developed Bonds
    This includes government, corporate, and securitized non-U.S. investment-grade fixed income investments, all issued in currencies other than the U.S. dollar and with maturities of more than one year. In our portfolio it offers a significant diversification of risk.

    Vanguard Total International Bond Index ETF (BNDX)

  • Emerging Market Bonds
    This index includes U.S. dollar-denominated bonds issued by emerging market governments, as well as government-owned corporations. These bonds tend to be more volatile, with movements more characteristic of a stock rather than a bond, which means they do an excellent job diversifying our portfolio. We use them sparingly in the overall portfolio.

    Vanguard Emerging Markets Government Bond Index ETF (VWOB)

Click each ETF's ticker symbol to download prospectus

Why these bond ETFs?

These bonds ETFs allow us to choose a precise level of risk, and then get the best possible return at that level of risk by balancing four different growth factors: U.S. interest rate risk, U.S. company credit risk, international interest rate risk, and international credit risk.

Taking on a higher exposure to any of these factors means higher expected returns, with higher potential for short-term losses. However, by blending them together intelligently, we can maintain the return level and reduce the severity of losses.

Optimal Asset Allocation

Asset allocation is the art of combining assets to achieve the highest expected return for a given level of risk. With more diversified assets at every risk level, we are able to build a portfolio that has higher expected returns regardless of how much risk you want to take on.

When crafting our portfolio, we used two techniques usually only available to high net worth individuals: the Black-Litterman expected returns model, and optimization for downside risk measures.

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Black-Litterman


First, we employed the Black-Litterman model to generate forward-looking expected returns. To do this, we analyzed the global portfolio of investable assets and their proportions. The Black-Litterman model, a complex mathematical equation, allows us to use this global portfolio to generate forward-looking expected returns – for each asset class.

While many firms also use Black-Litterman to make short-term market-timing decisions by imposing their own views, we adhere to our core index-based investment philosophy and do not. We get the best possible estimates of expected returns – those aggregated from millions of investors across the globe.

Optimization for Downside Risk


Next, we optimized the portfolio for each level of expected return, mixing assets to minimize the risk taken. We considered the potential downside (drawdowns) as well as the uncertainty (or expected volatility) as risk measures, and traded them off against expected return. The result allowed us to flexibly set asset allocation at every given level of risk.