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How to course correct when you simply can't stay the course May 12, 2025 3:20:36 PM De-risking during market volatility can be costly. Here’s how to do it without breaking the bank. The best course of action during market volatility is often inaction. That’s because selling riskier assets at a loss locks in those losses. It foregoes their potential for future growth, and it might also trigger capital gains taxes in the process. But if taking some sort of action feels necessary, then modestly reducing your overall risk exposure can be a reasonable alternative. Consider dialing down your existing stock allocation by a few percentage points, or lower the costs of recalibrating by using your future deposits instead. Either way, the solution may be the same: sprinkling in more bonds. Consider bonds to calm your investing nerves When people talk about diversification, equities like international stocks get most of the attention. But no less important in the role of managing risk are bonds. These are the loans given to governments and companies by investors, and while they're not completely risk-free (no asset is), the relatively-modest interest they tend to pay out can feel like a windfall when stock values are plunging. They won’t negate all of the volatility of stocks, but they can help smooth things out and preserve capital. This is why all of our recommended allocations include holding at least some bonds. One way to de-risk some of your future investing is with one of our portfolios made up of both stocks and bonds (Core, Value Tilt, etc.). We’ll recommend a risk level based on your goal, but we make it easy to dial up the bond allocation to your preference. Over time, you can slowly finetune things until your collective risk feels right. Or you can let us automatically adjust it based on your target date. We also offer two portfolios comprised entirely of bonds, each one designed for a different use: The BlackRock Target Income portfolio, designed to help you limit market volatility, preserve wealth, and generate income. The Goldman Sachs Tax-Smart Bonds portfolio, designed for high-income individuals seeking a higher after-tax yield compared to a cash account. Don’t forget about the role of cash One of the best ways to mitigate your overall financial risk is by shoring up your emergency fund, and preferably in a high-yield cash account like our Cash Reserve. Imagine losing your income stream, and how much time you'd want to get back on your feet. A good place to start is 3-6 months' worth of your essential expenses, but your right amount is whatever helps you sleep more soundly at night. Steadying the ship during unsteady times As we mentioned up front, right-sizing your risk during downturns isn’t always cheap. But there are ways to minimize the costs. Lowering your risk profile incrementally is one of them, and stretching out your safety net is another. Either way, it’s okay to recalibrate your risk tolerance from time-to-time, and you can do it wisely with Betterment.

With U.S. markets struggling, is now the time to go global? May 7, 2025 6:00:00 AM Here’s the case for keeping a little international exposure in your investing. U.S. stocks have been the envy of the world since 2010, generating nearly 4 times the returns of their international counterparts. But since April 2, President Trump’s tariff policies have dragged down U.S. stocks and left investors unnerved. Does this mean the U.S. market is toast? Certainly not, but it does signal a potential shift in foreign investment, which means that if you haven’t already, now may be the time to consider diversifying globally. And we can help on that front. Hello, world. We're here to invest. The U.S. market is big, but it’s not the only game in town. Hundreds of billions of dollars in assets trade hands in international markets each day. It's why the Betterment Core portfolio, built on the idea that more diversification equals less risk, roughly mirrors the relative weights of global markets. Like we mentioned above, the U.S. market has been on an absolute tear the past 15 years, and even more so since 2020. This record winning streak has fueled our home bias, or the tendency for American investors to favor American markets. But history shows a pendulum that typically swings back and forth every 5 to 10 years. International markets outperformed in the 2000s, for example, and they saw a huge spike in the late 80s. So what’s an investor to do? If you're investing for the long term, the odds are good the U.S. market will hit at least one extended rough patch in that time. And in that scenario, a globally-hedged portfolio will very likely smooth out your returns from year to year. We’re seeing this start to play out in 2025, with the Betterment Core portfolio and its global diversification outperforming many common U.S.-only funds. As of 5/2/2025. Betterment Core composite actual time-weighted returns: 10.52% over 1 year, 12.35% over 5 years, and 7.30% over 10 years as of 5/2/2025. Composite performance calculated based on the dollar weighted average of actual client time-weighted returns for the Core portfolio at 90/10 allocation, net fees. Performance not guaranteed, investing involves risk. That being said, diversification is a sliding scale. There is no pass/fail, no good or bad. If you’re looking for a little more international exposure, but not to the extent of one of our pre-built portfolios, you can invest in our Flexible portfolio and tailor your allocation as you see fit. But if you’re less experienced in investing, and simply want an option that requires less work, then let us do the recalibrating for you. We update our pre-built portfolios annually, finetuning our U.S. and international exposures based on the latest long-term projections. We can’t predict when the global tides will turn, but we can make sure you don’t miss out when they do.

How tax loss harvesting turns market losses into tax wins Apr 28, 2025 6:00:00 AM The tax strategy can unlock similar benefits as tax-deferred accounts Tax loss harvesting, or TLH for short, is selling an asset at a loss (which can happen especially during market downturns) primarily to offset taxes owed on capital gains or income. It shifts some of the taxes you might owe now, in other words, into the future. But the key takeaway is this: TLH can take a portion of your taxable investing and effectively turn it into tax-deferred investing. And tax-deferred investing, as we’ll quickly demonstrate, can do wonders for wealth-building. Tax me now or tax me later Take a dollar you would’ve otherwise paid in taxes today. Now invest it wisely. Odds are, it’ll be worth a lot more in the long run, even taking away any taxes you eventually owe. Depending on how your tax situation shakes out over the years, tax-deferred investing can be like Uncle Sam giving you a nearly interest-free loan to invest. This is in large part why tax-deferred accounts like traditional 401(k)s and IRAs come with restrictions. They’re reserved for retirement, namely, and their contributions are capped. But tax loss harvesting opens an entirely new door for tax-deferred investing, along with a few other side benefits. For a few types of investors in particular, it offers tremendous upside. Who TLH benefits the most Let’s start with an important caveat: While TLH offers potential value for most investors, it can be a wash or actually increase your tax burden in certain cases. But for now, let’s focus on three types of investors who can reap some of the biggest rewards from the strategy: The high-income earner Once you’ve offset all of your realized capital gains taxes for a given year, any leftover harvested losses can be used to offset taxes on up to $3,000 of ordinary income. So in the case of high earners, this means trading a high income tax rate for a relatively low long-term capital gains tax rate. The end result is both deferring and discounting your taxes. The steady saver Not only are recurring deposits a great way to start a savings habit, they also produce more harvesting opportunities. That’s because the older an investment, the less likely it drops below its initial purchase price (aka “cost basis”) and can be harvested at a loss. A steady drip of deposits, monthly for example, creates fresh crops of investments for harvesting in the near future. The tax-smart philanthropist A common misconception of tax loss harvesting is that it helps you avoid paying taxes altogether. Believe it or not, however, two scenarios exist in which you actually can cancel out your tax obligation: The first is when you donate shares to charity. As we mentioned earlier, selling and replacing shares as part of a harvest increases their future tax bill. It does this by lowering the shares’ cost basis, or the initial purchase price used to calculate capital gains. If you donate and replace these shares down the road, however, you reset their cost basis to a new, higher level. This effectively wipes out their entire tax bill(!) that had accrued to that point. In the eyes of the IRS, it’s like those capital gains never happened, and it’s one big reason why wealthy investors have long paired TLH with the practice of donating shares. The second scenario is posthumously. At that point, you won’t get a tax break, of course. But any individuals who you leave shares to will, because immediately after your death, the cost basis of your investments similarly “steps up” to their current market value. Your harvest awaits Historically-speaking, tax loss harvesting has been too time-intensive and costly to execute for all but the wealthiest of investors. But technology like ours and the low-cost trading of ETFs have made it a tax strategy for the masses. Take the market volatility of 2025 as an example. In little more than two weeks (March 26-April 10), Betterment harvested nearly $60 million in tax losses for customers. If TLH is right for you, the sooner you open and start contributing to a taxable account, the sooner you can start giving a portion of your taxable investing an edge. If you already have a Betterment taxable account, here’s how to turn on tax loss harvesting.

How to leverage your taxable investments into lending Apr 22, 2025 9:00:00 AM Examining the pros and cons of the Securities-Backed Line of Credit (SBLOC) Editor’s note: SBLOCs are offered by The Bancorp Bank, N.A., Member FDIC, to Betterment clients. Betterment is not a bank. See more below. Sometimes in life, despite your best-laid plans, you need quick access to cash. Say you bought a new home and need to bridge the gap until you sell your old one. Or a smart business opportunity presents itself. If you have a sizable amount of investments in taxable accounts, you can leverage them into a Securities-Backed Line of Credit (SBLOC), a little-known but increasingly-available form of short-term lending. Unlike many conventional loans, SBLOCs typically provide access to the line quickly after approval. And crucially, they keep your assets invested and avoid triggering capital gains taxes1. If the market drops, that means you avoid locking in those losses. And if the market goes up, that growth can help offset some of your lending costs. Plenty more details exist for this type of borrowing, so keep reading to learn more. The basics of SBLOC borrowing SBLOCs are revolving lines of credit you can use over and over again, as opposed to the one-time nature of many loans. Many lenders require at least six-figures’ worth of taxable investments to qualify for one, with credit limits often falling somewhere between 50% and 95% of the investments’ value depending on how risky they are. Betterment SBLOC powered by The Bancorp Minimum assets needed Approx. $150k in taxable assets or less, depending on their risk profile2 Maximum credit/loan available Approx. 50-95% of taxable assets2, depending on their risk profile Interest rate Variable rate3 based on assets committed Repayment options Flexible As mentioned above, one of the key benefits of SBLOCs is that your taxable assets stay invested, giving them the chance to grow. SBLOCs are also more multi-purpose than many loans, with one notable exception being that you can’t use them to buy more securities or to fund margin loans. In addition to versatility, they tend to offer competitive interest rates lower than that of a personal loan or credit card. Our SBLOC offering, which is powered by our banking partner The Bancorp, has a variable interest rate that’s tied to The Wall Street Journal prime rate and discounted based on the amount of taxable assets committed4. Short-term lending does come with risks, however, and speaking with an advisor can help you weigh those risks relative to your specific situation. That’s in large part why at Betterment, an SBLOC is offered through our Premium tier, which gives you unlimited access to our team of advisors. When (and how) the bill comes due SBLOCs offer relatively flexible payback terms, with many only requiring monthly interest payments and some (like The Bancorp’s) with an option to add the interest to the loan balance instead of paying it right away. This is known as “capitalizing” the interest. Bear in mind that if the value of your investments drops enough, your lender may make what’s called a “maintenance call” and require you to reallocate your portfolio to obtain a higher borrowing power, provide additional collateral or sell some of your assets and pay any applicable capital gains tax1. The bottom line of borrowing this way If you’re looking for quick access to capital without disrupting your investment strategy, then an SBLOC may be right for you. And if you do come to that conclusion, then we and our trusted banking partner, The Bancorp, are here to help. They were the first bank to offer SBLOCs to independent advisors in 2004, broadening access to this type of borrowing. And their simple application process can generally provide a quick turnaround, helping fund today’s plans without touching tomorrow’s dreams.

How we make market downturns less scary Apr 7, 2025 12:12:58 PM And how it can benefit your investing’s bottom line. The recent round of tariffs and trade wars have roiled markets, offering the latest example of investing’s inherent volatility. The fact that market drops do happen, and happen with some regularity, means that managing them is not only possible but paramount. "It's not about whether you're right or wrong," the investor George Soros once quipped. "But how much money you make when you're right, and how much you lose when you're wrong." Mitigating losses, in other words, matters just as much as maximizing gains. And this is true for two important reasons: The bigger the loss, the more tempted you may be to sell assets and lock in those losses. The bigger the loss, the less fuel for growth you have when the market does rebound. Point A is psychological, while Point B is mathematical, so let’s take each one separately. In the process, we’ll explain how we build our portfolios to not only weather the storm, but soak up as many rays as possible when the sun shines again. Smoothing out your investing journey Imagine you’re given a choice of rides: one’s a hair-raising roller coaster, the other a bike ride through a series of rolling hills. Sure, thrill seekers may choose the first option, but we think most investors would prefer the latter, especially if the ride in question lasts for decades. So to smooth things out, we diversify. Owning a mix of asset types can help soften the blow on your portfolio when any one particular type underperforms. Our Core portfolio, for example, features a blend of asset types like U.S. stocks and global bonds. The chart below shows how those asset types have performed individually since 2018, compared with the blended approach of a 90% stocks, 10% bonds allocation of Core. As you can see, Core avoids the big losses that individual asset classes experience on the regular. That’s one reason why through all the ups and downs of the past 15 years, it’s delivered 9% composite annual time-weighted returns1, and that’s after fees are accounted for. 1As of 12/31/2024, and inception date 9/7/2011. Composite annual time-weighted returns: 12.7% over 1 year, 7.9% over 5 years, and 7.8% over 10 years. Composite performance calculated based on the dollar-weighted average of actual client time-weighted returns for the Core portfolio at 90/10 allocation, net of fees, includes dividend reinvestment, and excludes the impact of cash flows. Past performance not guaranteed, investing involves risk. Core’s exposure to global bonds and international stocks has also helped its cause, given their outperformance relative to U.S. stocks year-to-date amidst the current market volatility of 2025. A smoother ride can take your money farther Downside protection is all the more important when considering the “math of losses.” We’ll be the first to admit it’s hard math to follow, but it boils down to this: as a portfolio’s losses rack up, the gains required to break even grow exponentially. The chart below illustrates this with losses in blue, and the gains required to be made whole in orange. Notice how their relationship is anything but 1-to-1. This speaks to the previously-mentioned Point B: The bigger your losses, the less fuel for growth you have in the future. Investors call this “volatility drag,” and it’s why we carefully weigh the risk of an investment against its expected returns. By sizing them up together, expressed as the Sharpe ratio, we can help assess whether the reward of any particular asset justifies its risk. This matters because building long-term wealth is a marathon, not a race. It pays to pace yourself. And yet, there will still be bumps in the road Because no amount of downside protection will get rid of market volatility altogether. It’s okay to feel worried during drops. But hopefully, with more information on our portfolio construction and automated tools like tax loss harvesting, you can ride out the storm with a little more peace-of-mind. And if you’re looking for even more reassurance, consider upgrading to Betterment Premium and talking with our team of advisors.

How socially responsible investing connects your holdings to your heart Mar 31, 2025 7:00:00 AM Learn more about this increasingly-popular category of investing. Socially responsible investing (SRI), also known as environmental, social, and governance (ESG) investing, screens for companies that consider both their returns and their responsibility to the wider world. It’s a growing market for investors, with assets totaling $30 trillion as of 2022. We launched our first SRI portfolio back in 2017, and have since expanded to a lineup of three options: Broad Impact Social Impact Climate Impact All three are globally-diversified, low-cost, and built to help align your investing with your values. So let’s explore a few ways they do that, before tackling a common question about the SRI category in general: performance. How our Social Impact portfolio lifts up underserved groups Social Impact uses the Broad Impact portfolio’s foundation while adding a trio of funds focused on helping underserved groups get on equal footing. There’s $SHE and $JUST, which screen for U.S. companies demonstrating a commitment toward gender and social equality, respectively. Then there’s $VETZ, our latest addition to the portfolio. $VETZ is the first of its kind: a publicly-traded ETF that mainly invests in loans to active and retired U.S. service members, and the survivors of fallen veterans. These types of home and small-business loans have historically helped diversify portfolios, and they also help lower borrowing costs for veterans and their families. And unlike $SHE and $JUST, which are comprised of stocks, $VETZ is an all-bond fund. So even if you have a lower appetite for risk when investing, your SRI portfolio can maintain an exposure to socially responsible ETFs. How the $VOTE fund is shaking up shareholder activism Remember the “G” in ESG? It stands for governance, or how companies go about their business. Do they open up their books when necessary? Is their leadership diverse? Are they accountable to shareholders? On that last front, there’s the $VOTE ETF found in each one of our SRI portfolios. On the surface, it seems like a garden variety index fund tracking the S&P 500. Behind the scenes, however, it’s working to push companies toward positive environmental and social practices. It does this by way of “proxy” voting, or voting on behalf of the people who buy into the fund. Engine No. 1, the investment firm that manages $VOTE, puts these proxy votes to use during companies’ annual shareholder meetings, where individual shareholders, or the funds that represent them, vote on decisions like board members and corporate goals. In 2021, Engine No. 1 stunned the corporate world by persuading a majority of ExxonMobile shareholders to vote for three new board members in the name of lowering the company’s carbon footprint. And it did all this in spite of holding just .02% of the company’s shares itself. Not a bad return on investment, huh? Does SRI sacrifice gains in the name of good? We now stand eye-to-eye with the elephant in the room: performance. Worrying about returns is common regardless of your portfolio, so it’s only natural to question how socially responsible investing in general stacks up against the alternatives. Well, the evidence points to SRI comparing quite well. According to a survey of 1,141 peer-reviewed papers and other similar meta-reviews: The performance of SRI funds has “on average been indistinguishable from conventional investing.” And while the researchers note that it’s “likely that these propositions will evolve,” they also found evidence that SRI funds may offer “downside” protection in times of social or economic crisis such as pandemics. Your socially responsible investing, in other words, is anything but a charity case. Simplifying the socially responsible space Not long ago, SRI was barely a blip on the radar of everyday investors. If you were hip to it, you likely had just two options: DIY the research and purchase of individual SRI stocks Pay a premium to buy into one of the few funds out there at the time Those days are thankfully in the past, because our portfolios make it easy to express your values through your investing. And our team of investing experts regularly seeks out new funds like $VETZ and updated SRI standards that strive to deliver more impact while helping you reach your goals. Check out our full methodology if you’re hungry for more details. And if you’re ready to invest for a better world, we’ve got you covered.