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Three ways it can pay to automate your investing

Three ways it can pay to automate your investing Dec 12, 2025 9:31:24 AM Our managed offering adds value beyond a DIY approach. Here’s how. Key takeaways Portfolio construction is just the beginning. Betterment’s automated investing is designed to help you manage risk, maximize returns, and minimize leg work. Tax-smart features help you keep more of what you earn. Fully-automated Tax Coordination and tax-loss harvesting seek out efficiencies hard to replicate by hand. Navigation helps keep your goals on track. Automated rebalancing, effortless glide paths, and recurring deposits make it easier to stay the course through market ups and downs. Peace of mind is part of the return. Automation frees up time and headspace, letting you live your life instead of worrying about your portfolio. With the arrival of self-directed investing at Betterment, you can choose from thousands of individual stocks and ETFs on your own, including the very same funds we research and select for our curated portfolios. So if you can now buy the same low-cost investments, why pay someone (i.e., us) to manage them for you? It’s a fair question, and to help answer it, it helps to understand why our portfolio construction is just the beginning of the story. It's not just the Betterment portfolio you see today, but the one you see tomorrow (and in the weeks, months, and years that follow) that captures the full value of our expertise and technology. The ongoing optimization and evolution of your portfolio, in other words, is where our automated investing really shines. Sometimes the benefits are tangible. Sometimes they’re emotional. But regardless of how you frame it, we’re constantly working in the background to deliver value in three big ways. Tax savings: keeping more of what you earn Navigation: keeping your investing on-track Calm: keeping your sanity—and your spare time 1. Tax savings: keeping more of what you earn One of the most reliable ways to increase your returns is lowering the taxes owed on your investments. And here's the first way Betterment’s managed portfolios can pay off. Our trading algorithms take tax optimization to a level that’s practically impossible to replicate on your own. Take our Tax Coordination feature, which uses the flexibility of our portfolios to locate assets strategically across Betterment traditional IRAs/401(k)s, Roth IRAs/401(k)s, and taxable accounts. This mathematically-rigorous spin on asset location can help more of your earnings grow tax-free. Then there’s our fully-automated tax-loss harvesting, a feature designed to free up money to invest that would've otherwise gone to Uncle Sam. Our technology regularly scans accounts to identify harvesting opportunities, then goes to work. It’s how we harvested nearly $60 million in losses for customers during the tariff-induced market volatility of Spring 2025. Betterment does not provide tax advice. TLH is not suitable for all investors. Learn more. It’s also a big reason why nearly 70% of customers using our tax-loss harvesting feature had their taxable advisory fee covered by likely tax savings.1 And with the upcoming addition of direct indexing to Betterment’s automated investing, our harvesting capabilities will only continue to grow. 1 2. Navigation: keeping your investing on-track It’s easy to veer off-course when managing your own investing. Life happens, calendars fill up, and the next thing you know, your portfolio starts to drift. When you pay for automated investing, however, you not only get our guidance upfront, you benefit from technology designed to get you to your destination with less effort. As markets ebb and flow, for example, we automatically rebalance your portfolio to maintain your desired risk level. And the “glide path” that automatically lowers your risk as your goal nears? It just happens in eligible portfolios. No research or calendar reminders needed. Our management also helps steer your investing toward a time-tested path to long-term wealth. Most of our portfolios are globally diversified so you take advantage when overseas markets outperform. And we encourage recurring deposits so you buy more shares when prices are low. Recent research by Morningstar helps quantify the value of this “dollar-cost averaging” approach. They found investors lost out on roughly 15% of the returns their funds generated due in large part to jumping in and out of the market. Betterment customers using recurring deposits, meanwhile, earned nearly 3% higher annual returns.2 It turns out it’s easier to stay the course with a little help. 2 3. Calm: Keeping your sanity—and your spare time Our automation can save you time—two hours for each rebalance alone3—but the value of automating your investing is more than just time saved. It’s quality time spent. How much of your finite energy, in other words, are you spending worrying about your money? We can’t erase all of your anxiety, but our team and our tech can empower you to build wealth with confidence and ease, with an emphasis on the ease. 3 Between market volatility and a constant barrage of scary headlines, the world is stressful enough right now. There’s little need to add portfolio optimization and upkeep to the list. That is, of course, unless you enjoy it. But many of us don’t. The majority of Betterment customers we surveyed said they hold most of their assets in managed accounts, with self-directed investing serving as a side outlet for exploration. That’s why we offer both ways to invest at Betterment. The payoff is personal Investing performance and price are often measured down to the hundredth of a percentage point. That’s “zero point zero one percent” (0.01%), also known as a “basis point" or "bip" for short. Here at Betterment, it’s our mission to make every one of the 25 bips we most commonly charge worth it. We measure our portfolio’s performance after those fees, so you see what you’ve really earned. And we don’t stop there. With direct indexing and fully paid securities lending coming soon to automated investing, you’ll get even more ways to make your money work harder.

Can a portfolio be too simple?

Can a portfolio be too simple? Dec 10, 2025 2:22:50 PM Total market funds offer simplicity, but by unbundling asset classes—and adding Betterment’s automation—you can make your money work harder. Key takeaways Single-fund portfolios are easy to build, but they’re harder to optimize for taxes and costs. Using multiple funds adds the flexibility to fine-tune allocations and unlock savings. Betterment’s automation and expert-built portfolios give you the best of both worlds: easy to invest in, and built to work harder. If you’re looking to build long-term wealth, you could do worse than investing in one or two low-cost, globally-diversified total market funds. But you could potentially do better—and spend less of your limited bandwidth—by using a few more pieces and putting our technology to work in your favor. That’s the value of Betterment’s automated investing and expert-built portfolios, and it begins with (surprise!) tax optimization. Harvesting losses for tax wins, and putting your assets in the right place Targeting more than a date Splitting hairs on fund fees, so customers can save millions Harvesting losses for tax wins, and putting your assets in the right place Tax-loss harvesting can help give your taxable investing an edge, and it happens when you sell an asset for a loss and replace it with a similar one. The downside of a total market fund, however, is you have to wait for the entire fund to experience a loss. If only one piece of it dips, you can’t unbundle the assets and harvest that specific piece. It’s sell all, or sell nothing. That’s a big reason why we switched from using a single fund for U.S. stocks in our Betterment-built portfolios, opting instead for three separate funds representing small, medium, and large-sized U.S. companies. If one of them presents a harvesting opportunity, we can swap it for a similar alternative. The second area where larger fund lineups shine is asset location, or strategically divvying up your portfolio’s assets among traditional, Roth, and/or taxable accounts. Stocks with the highest potential for growth, for example, are often better-suited for traditional accounts. Let them grow tax-free, the thinking goes, then settle up with Uncle Sam when you’re retired and more likely to be in a lower tax bracket. Our mathematically-rigorous spin on asset location is called Tax Coordination, and it’s yet another way our automated investing helps you keep more of what you earn. To start taking advantage of it, simply open any combination of the three account types above and follow a few easy steps. Targeting more than a date One of the most common single-fund options for retirement savings are target date funds. They date back to the 90s and became the default option in many 401(k) plans starting in the late 2000s. The growth of target date funds has been a good thing for investors, helping move the industry toward lower-cost, automated investing. Prior to their arrival, advisors had to manually adjust the asset allocations or “glide paths” of portfolios over time. Similar to total market funds, however, the bundling of target date funds brings with it some constraints. The first constraint is their relative lack of choice. Say you were born in 1988 and are targeting a traditional retirement age of 62. Most target date fund managers give you one option—the 2050 fund. Our automated investing, on the other hand, gives you more than a handful of portfolios to choose from, including ones tailored for social responsibility and innovation. More funds also creates more levers to fine-tune your exposure, helping manage risk in all sorts of situations. Take bond-heavy portfolios as an example. Rising interest rates can erode their value, so we dial up their exposure to short-term corporate debt and U.S. Treasuries specifically to help hedge against that risk. Splitting hairs on fund fees, so customers can save millions The relatively high cost of target date funds has been trending downward, and many total market funds can be found for expense ratios of less than 0.1%. But we can squeeze out even more savings by splitting a portfolio up and shopping for better deals. A single one hundredth of a percentage point in fund fees (what’s referred to as a “basis point” or “bip” in investing lingo) may not sound like much, but we owe it to our customers to make every one count. You could pay 6 basis points (0.06%), for example, for a total world stock fund like VT. Or you could pay one-third of that for your U.S. stock allocation by breaking it up into three funds (SPYM, SPMD, and SPSM) like we do with our Core portfolio and others. Using our customers’ nearly $20 billion worth of U.S. stocks as an example, that would amount to roughly $7.6 million in combined savings each year. Flexibility to stretch your investing dollars even farther A simple portfolio can be a great place to start, but it’s not always where your money works hardest. By strategically using a few more funds, we can sprinkle tax advantages on more of your investing, optimize across account types, and potentially unlock even more cost savings. All automatically. You get the simplicity you want, but with our tech doing the heavy lifting behind the scenes.

Three steps to size up your emergency fund

Three steps to size up your emergency fund Dec 3, 2025 6:00:00 AM Strive for at least three months of expenses while taking these factors into consideration. Imagine losing your job, totaling your car, or landing in the hospital. How quickly would your mind turn from the shock of the event itself to worrying about paying your bills? If you’re anything like the majority of Americans recently surveyed by Bankrate, finances would add insult to injury pretty fast: Only around 2 in 5 Americans would pay for an emergency from their savings In these scenarios, an emergency fund can not only help you avoid taking on high-interest debt or backtracking on other money goals, it can give you one less thing to worry about in trying times. So how much should you have saved, and where should you put it? Follow these three steps. 1. Tally up your monthly living expenses — or use our shortcut. Coming up with this number isn’t always easy. You may have dozens of regular expenses falling into one of a few big buckets: Food Housing Transportation Medical When you create an Emergency Fund goal at Betterment, we automatically estimate your monthly expenses based on two factors from your financial profile: Your self-reported household annual income Your zip code’s estimated cost of living You’re more than welcome to use your own dollar figure, but don’t let math get in the way of getting started. 2. Decide how many months make sense for you We recommend having at least three months’ worth of expenses in your emergency fund. A few scenarios that might warrant saving more include: You support others with your income Your job security is iffy You don’t have steady income You have a serious medical condition But it really comes down to how much will help you sleep soundly at night. According to Bankrate’s survey, nearly ⅔ of people say that total is six months or more. Whatever amount you land on, we’ll suggest a monthly recurring deposit to help you get there. We’ll also project a four-year balance based on your initial and scheduled deposits and your expected return and volatility. Why four years? We believe that’s a realistic timeframe to save at least three months of living expenses through recurring deposits. If you can get there quicker and move on to other money goals, even better! 3. Pick a place to keep your emergency fund We recommend keeping your emergency fund in one of two places: cash—more specifically a low-risk, high-yield cash account—or a bond-heavy investing account. A low-risk, high-yield cash account like our Cash Reserve may not always keep pace with inflation, but it comes with no investment risk. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more. An investing account is better suited to keep up with inflation but is relatively riskier. Because of this volatility, we currently suggest adding a 30% buffer to your emergency fund’s target amount if you stick with the default stock/bond allocation. There also may be tax implications should you withdraw funds. Your decision will again come down to your comfort level with risk. If the thought of seeing your emergency fund’s value dip, even for a second, gives you heartburn, you might consider sticking with a cash account. Or you can always hedge and split your emergency fund between the two. There’s no wrong answer here! Remember to go with the (cash) flow There’s no final answer here either. Emergency funds naturally ebb and flow over the years. Your monthly expenses could go up or down. You might have to withdraw (and later replace) funds. Or you simply might realize you need a little more saved to feel secure. Revisit your numbers on occasion—say, once a year or anytime you get a raise or big new expense like a house or baby—and rest easy knowing you’re tackling one of the most important financial goals out there.

How donating shares instead of dollars can lead to tax-free investing

How donating shares instead of dollars can lead to tax-free investing Dec 1, 2025 8:00:00 AM And how we make it easy. Key takeaways 2017 legislation weakened the federal income tax incentive for donating to charity. Donating and replacing taxable shares, however, can unlock a new avenue for tax savings. Pairing the strategy with tax-loss harvesting can lead to even more savings. Betterment gives you two easy ways to donate shares: directly to one of our partner charities, or through a donor-advised fund. Donating to charity isn't the big tax write-off it used to be. Not since the 2017 Tax Cuts and Jobs Act watered down the charitable tax deduction. But altruistic investors such as yourself have another tax-saving option at your disposal: donating shares. In this article, we’ll walk you through: How donating (then replacing) shares resets their tax bill How adding tax-loss harvesting can plus-up the savings How we make it easy to donate shares How donating (then replacing) shares resets their tax bill Let's start with a couple prerequisites up front: You can only donate appreciated shares, meaning ones that have gained in value. We require that you've held them for at least a year to maximize the potential tax savings. You can only donate shares from a taxable investing account. That means tax-advantaged accounts like 401(k)s and IRAs—with one exception for those 70 ½ or older—are off the table. So if you'd like to start leveraging this tax strategy, you'll need to first open and fund a taxable investing account. Similar to the mechanics of tax-loss harvesting, donating shares lowers your taxes thanks to a little something called cost basis. Cost basis is the price you pay for a share. It's how the IRS calculates the profits (aka capital gains) on your investing, and by extension your taxes owed on that investing. By donating and (most importantly) replacing shares, you reset the price paid for that slice of your investing. This means a share that had increased in value by say, 20%, suddenly becomes, in the eyes of the IRS, a share that hasn't appreciated at all. It's as if all the profit to that point never happened. Don't worry; the capital gains are still very much there. And you're wealthier for it. But the taxes owed when you ultimately sell those investments will be lower than if you had never donated. How adding tax-loss harvesting can plus-up the savings Tax-loss harvesting (TLH) helps you defer taxes down the road, freeing up more cash to invest now. And it does this by letting you deduct taxes today in exchange for a higher tax bill in the future. You can think of it like handing Uncle Sam an IOU come tax time. But guess what happens when you donate a share that was originally part of a harvest? You erase its entire tax bill—IOU and all—up to that point. It's one of the few ways you can actually avoid paying taxes altogether on some of your investing. So it’s no wonder why this combo move has long been a favorite of the wealthy. Now, thanks to technology like ours, it's never been easier for everyday investors to do right while reaping the same rewards. How we make it easy to donate shares Before tech like ours helped lower barriers, donating shares required several steps, things like tracking down the charity’s brokerage information, figuring out which shares to give, and filling out the necessary forms. But with Betterment, it’s as easy as logging in on a desktop browser and making a few clicks. We show you exactly how much of your taxable investing is eligible to donate, and our TaxMax technology seeks out the most tax-efficient shares to sell and donate. We also give you two ways to give. Donate directly to more than a dozen partner charities. We don’t charge any processing fees, so your entire donation goes directly to them. Open a donor-advised fund (DAF) with our partners at Daffy and donate to that, then choose from up to 1.5 million nonprofits, schools, and faith-based organizations while your funds stay invested. You get the tax deduction up front and can then automate your giving or disperse funds as you go. DAFs have historically come with high minimums, high fees, and dated technology, but Daffy is doing its best to change that. DAFs compared Daffy Fidelity Schwab Vanguard Minimum to open $0 $0 $0 $25,000 Minimum annual cost $36 0.60% or $100 0.60% 0.60% or $250 Average investment fee 0.05% 0.54% 0.65% 0.06% Source: Daffy Give smarter. Save bigger. Feel better. By donating and replacing shares, you can give your taxable investing a fresh start. Pair it with tax-loss harvesting, and you could wipe out even more of your tax bill while keeping your money growing. And since Betterment takes care of the tricky parts, from choosing which shares to donate to handling the logistics, giving smarter has never been easier. It’s one simple move that helps your portfolio—and your favorite cause—thrive.

Self-directed investing, the Betterment way