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Betterment’s trading execution methodology Nov 3, 2025 3:55:00 PM Enhancing execution quality through managed trading Betterment already manages rebalancing and tax optimization at scale—but there’s another layer of value working behind the scenes: execution. This paper focuses on how Betterment improves trade execution through intelligent design and infrastructure. Our system doesn’t just serve one segment of users; it applies equally across the platform, enabling everyone to tap into scalable benefits that were once reserved for institutions. One key aspect is our use of marketable limit orders—orders placed near or slightly better than the current market price so they can execute immediately. This type of order is designed to strike a balance between speed and price control: it seeks a fast execution while placing a guardrail on how far the price can drift. For clients, this means greater protection during periods of market volatility—helping ensure that trades don’t fill at prices significantly worse than expected. Another foundational element is our use of an omnibus trading structure. Rather than executing each individual order separately, Betterment aggregates client trades allowing us to batch and route them more efficiently. This method helps us access deeper liquidity and potentially reduce overall execution costs. Through features like scheduled trade windows, omnibus aggregation, and a design that favors round-lot execution, Betterment helps minimize structural trading disadvantages, reduce exposure to adverse selection, and increase the potential for improved pricing. These execution benefits compound with scale and are embedded directly into the trading experience. The result is greater fairness, efficiency, and cost-effectiveness for every investor on the platform. The challenge in retail execution Retail trading has evolved significantly in recent years, fueled by technological innovation and increased market accessibility. However, key structural disadvantages persist for individual investors, especially when it comes to small, odd-lot orders and immediate execution strategies. Betterment’s managed execution framework—aggregating and scheduling trades throughout the day—offers a powerful and scalable alternative designed to reduce costs, mitigate execution risk, and better align with the realities of market structure. While trades are scheduled into structured windows, they are executed multiple times during the trading day to balance timeliness with the opportunity for aggregations. Betterment does not net opposing orders; each trade is routed externally to our clearing partner. Market structure and the importance of round lots In equity markets, trade size plays a critical role in determining execution quality. A round lot—currently defined as 100 shares for the majority of tickers—is the standard unit recognized by exchanges and market makers. These trades are included in the National Best Bid and Offer (NBBO), prioritized in routing decisions, and eligible for execution in institutional venues. Even mixed-lot orders that include at least one round lot (e.g., 105 shares) benefit from this visibility, often improving pricing for the entire trade. In contrast, odd lots—any order smaller than a round lot—are excluded from the NBBO and typically experience lower priority, reduced transparency, and worse pricing. These orders dominate retail investor flows and often result in less favorable execution. Legal scholar Robert P. Bartlett III analyzed more than 3 billion U.S. equity trades in his 2021 paper and found that odd-lot orders received roughly 10% less price improvement than round lots. This is due to reduced visibility, exclusion from public quotes, and lower priority by execution venues. Trades of 99 shares were particularly disadvantaged compared to trades of 100, even when both were placed simultaneously. High-volume stocks like Amazon (AMZN) illustrated this disparity clearly—Bartlett estimated that over 30% of odd-lot trades in AMZN could have received better pricing if executed as round lots. Betterment’s managed trading approach is designed to help mitigate these penalties by systematically aggregating client flows to reach round-lot thresholds, increasing the likelihood of more favorable outcomes. Quantifying the impact: price discrepancies between lot sizes A core feature of Betterment’s execution strategy is aggregating client orders to cross the round-lot threshold wherever possible. This is not just a preference; it is a response to well-documented execution disadvantages that odd-lot orders face. To illustrate what that kind of pricing difference could mean in dollar terms, consider VTI, a highly liquid security frequently traded by Betterment clients. We selected VTI because it shares characteristics with AMZN—both are heavily traded by retail investors, benefit from high liquidity, and are broadly popular. As of May 2025, VTI trades at approximately $280 per share. If an odd-lot trade receives even just 2 basis points worse pricing than a round lot, this translates to a cost penalty of approximately $0.14 per share for odd-lot executions. For a 15-share odd-lot trade: this means a $2.10 higher cost. For someone investing $5k/month, this means roughly $30 a year in higher costs. Over a 30-year period, this could equate to more than $3,400 in missed gains, assuming 8% yearly growth. The pricing examples presented in this paper are based on internally derived simulations that reflect market behavior consistent with the cited peer-reviewed research. These examples are intended for illustrative purposes only, are not meant to communicate potential performance of any investment strategy, and are not predictive of execution outcomes for any individual trade. This pricing inefficiency compounds quickly and has significant implications when managing client assets at scale. Betterment’s execution engine is designed to help reduce this cost by structurally creating opportunities to aggregate orders into round lots. In line with our regulatory obligations, we aim to achieve best execution—a regulatory standard that requires seeking the most favorable terms reasonably available under prevailing market conditions. This includes evaluating factors such as price, speed, likelihood of execution and settlement, and overall cost. Betterment does not delay trades to form round lots, but it uses a system of time-based trade windows and an omnibus aggregation strategy to opportunistically cross the round-lot threshold when client order flow naturally aligns. This allows us to systematically access the more favorable pricing conditions typically associated with round-lot trades—potentially reducing cost and improving execution outcomes for clients. While our model is designed to improve execution quality in the aggregate, individual trade outcomes may vary depending on market volatility, order size, and venue-specific factors. Trade windows as a mechanism for better execution Most retail brokers execute trades continuously, immediately passing orders to the market. While this appears fast and transparent, it exposes clients to harmful microstructure dynamics. High-frequency traders (HFTs), for example, exploit real-time signals to capture spread value, often at the expense of slower retail flows. Betterment mitigates this by batching trades into scheduled trade windows. These windows operate throughout the day and function similarly to frequent call auctions—a concept studied by Budish, Cramton, and Shim (2015). Their research shows that batched execution reduces the arms race in trading latency, promotes fairness, and narrows spreads. Though Betterment does not run formal batch auctions, our windows are intended to serve a similar purpose: reducing predictability, concealing intent, and improving average execution. This design also lowers market impact by consolidating demand. Liquidity providers can see larger, more regular flows instead of a noisy, fragmented stream. A single larger order is more likely to attract competitive pricing because it signals meaningful interest and is easier for liquidity providers to match against existing supply. For example, multiple clients buying SPY over the same trade window are combined into one order, reducing slippage—the difference between the expected price and the actual execution price—and improving fills, or the likelihood that the entire order will be completed promptly at a desirable price. Execution in practice: Betterment’s strategy At Betterment, trades are executed in windows throughout the day. Each window consolidates similar trades—buy or sell, same ticker—into a single order, executed through an omnibus structure. Trades are routed through Apex, our clearing and trading partner, to venues offering a competitive combination of price, liquidity, and fill reliability, with round-lot opportunities prioritized. We work to achieve best execution in all trades routed through this process. This structure introduces flexibility without sacrificing fairness. Betterment does not delay execution for the sake of creating a round lot, but we design the system to allow aggregation when practical. If immediacy is necessary—such as at day-end—we will execute whatever lots are available.1 We also monitor managed accounts for rebalancing and tax-loss harvesting (TLH) opportunities. When Betterment’s trading algorithm evaluates client accounts for tax loss harvesting and rebalancing opportunities, it generally prioritizes identifying potential tax loss harvests ahead of potential rebalancing opportunities. This activity also plays a meaningful role in how we strive to optimize outcomes alongside our execution practices. When clients’ orders align, aggregation and scheduling increase the likelihood of a favorable outcome. 1Betterment reserves the right to delay trading under certain circumstances; more information about our trading practices and policies is available in our Form ADV. To support oversight of Betterment's execution quality, Betterment has established a formal Best Execution Committee tasked with oversight of execution quality. This committee performs a regular and rigorous review of trading outcomes, assessing execution quality across market centers using key metrics such as basis point deviation from market price at placement (placement strike), routing behavior, peer comparisons, and arrival price analysis. Evaluations are made across ticker, order size, and timeframes. Aggregation in action: a comparative scenario To further illustrate how aggregation leads to better execution, consider this example where three clients submit small trades around the same time. When routed individually, these odd-lot orders are exposed to the same disadvantages outlined earlier—such as worse pricing due to exclusion from the NBBO. But when aggregated into a single round-lot trade, the order gains visibility and priority, increasing the likelihood of receiving better pricing. Client Orders Without Aggregation With Aggregation Alice: Buy 35 shares Executed at $135.02 = $4,725.70 100 shares executed at $135.00 = $13,500.00 Bob: Buy 40 shares Executed at $135.01 = $5,400.40 Carol: Buy 25 shares Executed at $135.03 = $3,375.75 Total Cost Impact Total: $13,501.85 (varied, higher prices) Total: $13,500.00 (uniform, better pricing) Illustrative purposes only. Prices shown do not reflect actual client execution results. This example reinforces the earlier point about execution quality differences between odd-lot and round-lot trades—such as the estimated 2 basis point disadvantage found in high-volume stocks like VTI. A consolidated 100-share order, like the one shown here, is more likely to attract competitive pricing from liquidity providers because it is easier to match against existing supply and signals meaningful demand. This example illustrates a core insight: retail investors are disadvantaged when fragmented. But when they act collectively—via an automated platform like Betterment—they gain access to efficiencies normally reserved for large institutional traders. Delivering institutional benefits to retail investors Betterment’s model is designed to translate institutional market advantages into a retail context. Institutional desks execute trades strategically—splitting orders, timing placements, and waiting for liquidity. These techniques aren’t usually available to individuals, but Betterment’s platform replicates many of them algorithmically. By aggregating trades to reach round lots, using structured time-based execution, and accessing liquidity intelligently, Betterment customers may benefit from pricing and execution quality similar to what’s typically associated with institutional standards. This parity is especially powerful in volatile or illiquid conditions, where fragmented execution can be costly. Conclusion and client-centric outcomes Managed trading, as implemented by Betterment, is a deliberate, research-driven strategy to overcome the inherent flaws in retail execution. We combine trade scheduling, order aggregation, and a neutral fee structure to deliver meaningful advantages to individual investors. Our model does not guarantee better execution on every trade, but in the aggregate, it enhances pricing, reduces slippage, and levels the playing field. Betterment believes that balancing immediacy and opportunity is key. Betterment may wait to aggregate trades to seek improved execution, which we believe is a rational tradeoff. Betterment clients are not sacrificing control—they’re gaining efficiency. Over time, this system is designed to create small but consistent enhancements in return, aligning with our core mission: helping clients make the most of their money. References Bartlett, R. P. III. (2021). Modernizing Odd Lot Trading. Columbia Business Law Review. Budish, E., Cramton, P., & Shim, J. (2015). The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response. Quarterly Journal of Economics. American Economic Association. Research and publications on equity market structure and trading practices. NYU Stern School of Business. Faculty research on market microstructure and fairness. Australian Centre for Financial Research (ACFR). Market design and equity structure studies.

Your Betterment experience has just undergone a major upgrade Aug 18, 2025 9:57:03 AM A better way to manage your money is here. Your Betterment experience has just undergone a major upgrade, built around one idea: making managing your money more flexible and intuitive. We’ve redesigned how your accounts and goals work together, so you can organize your money the way that makes the most sense for you. What changed—and why? We’ve always believed in goal-based investing. It’s what sets Betterment apart. But in the past, each goal in Betterment was tied to a single account. That worked when needs were simpler. But you asked for more flexibility to reflect your financial life, and we’ve delivered. Now, by separating account data from goal advice, we’ve created space for more personalized guidance, clearer navigation, and more flexibility for you and your money. What you’ll see that’s new today: A cleaner design: A modern look that surfaces what matters most—no more digging through tabs. A dedicated page for each goal: Get personalized advice, projections, and next steps, all in one place. A streamlined overview of single accounts: See balances, holdings, and performance clearly, while being able to click through directly to access account details. A dedicated goal forecaster: Get insights in one place to see how actions may affect future earnings. And as a BONUS: Your Activity Page got an upgrade 🔄 Enjoy a clearer window into trades, transfers, and transactions. And we’re just getting started. We’re already building the next phase of features to make your Betterment experience more powerful and flexible. Multiple accounts in one goal: Get combined advice across different account types and tax treatments. Smarter, goal-specific advice: We’ll help you optimize every dollar for what you care about most.
 Shared goals: Soon, you’ll be able to co-own a goal with another Betterment user.
 More tailored investing guidance: Tell us your goal, and we’ll recommend the best path to get there. A faster, more user-friendly Betterment experience. To better fit your financial needs, we’ve separated account data from goal-based advice to give you more control and a better sense of ownership over your account. Whether you're planning for retirement, building an emergency fund, or simply growing your wealth through automated investing, Betterment is now better built for how you’ll manage your money. Smarter tools, personalized advice, and goal-based investing—all working together for you.

Inside the investing kitchen, part 3 Aug 15, 2025 12:00:00 PM Order up! See how we handle thousands of trades each day to keep customers’ portfolios humming. When a chef plates a meal, they typically send it off, never to be seen again. But serving up an investing portfolio is an ongoing affair. Deposits come in. Withdrawals go out. Asset classes grow and shrink as the market moves. Rebalancing takes place on the regular. All of this requires daily trading. And this buying and selling of securities is among the most intricate and highly-regulated pieces of our operations. So while the first two parts of this series cover the recipes and ingredients behind our investing, our final course focuses on the team—and tech—behind every transaction. What happens when you hit "deposit" Cara Daly is an adventurer at heart. An avid surfer and the daughter of a flight attendant, she racks up air miles chasing waves and visiting family in Ireland. So naturally, she's gravitated toward one of the more thrill-seeking roles on our Investing team: Capital Markets. From the minute markets open each day, Cara and team monitor the action, making sure our customers' orders go smoothly. These trades can amount to hundreds of millions of dollars in a single day, and the system that executes them all is in many ways our secret sauce. It's custom-built (a rarity in the industry) and plays the role of Mission Control. When a customer clicks "deposit," for example, that single click gets translated into a series of purchases. These in turn get bundled up with other purchases of a like-kind and turned into orders, which are then executed at calibrated intervals as a part of our managed trading strategy. This sort of intentional trading is incredibly important because of the scale of our operations. We manage more than $56 billion of assets, making us the largest independent robo-advisor out there. We may not "make" markets, but our trading volume is big enough to potentially influence them. So we need to be mindful of how and when our trades get executed. “Say the market trades $10 million of a hypothetical security on any given day,” Cara says. “If our customers happen to want $20 million of it, meeting all that demand without minding the bigger context could drive up the price.” To navigate these executional challenges, we deploy multiple strategies as needed (see below for a few examples), evaluating and calibrating each on a continuous basis. Taken altogether, they help ensure our customers' purchases and sales get treated fairly in the market. Waiting out the first half hour after markets open before starting our trading. This helps sidestep some of the volatility that's common early in the day. Trading periodically throughout the day, and randomizing when customers’ orders are processed. It's possible that prices can loosely correlate with certain times of the day, so we don't want that to consistently affect any one customer. Briefly holding back on “system-generated” trading (proactive rebalancing, for example) for any particular fund if its trading reaches a certain threshold relative to its average daily volume. This helps make sure “user-directed” trading (when customers make deposits or withdrawals, to name a few examples) can continue regardless. Partnering with industry experts like Apex to route and execute orders across multiple firms, helping us stay at the forefront of the evolving market landscape. This access to different execution venues also helps seek out the most favorable terms for customers—whether that’s price, speed, or overall execution quality. Switching gears from execution to tax optimization, we also use both primary and secondary funds for most of our asset classes. These backup “tickers” come into play during times of heightened volatility in markets. Moments that can make or break an investing strategy. Acing the stress test of market volatility More often than not, it's business as usual on our Capital Markets team, and that's by design. But during stretches of extreme volatility, when trading volume really picks up and prices can swing wildly from hour to hour, it's all hands on deck. Cara and company monitor our trading system for signs that additional oversight may be needed. They ease emerging bottlenecks in real time and keep things running smoothly, at times enlisting the support of our Trading Engineering team. Cara Daly (left) helps make sure customers’ daily trading goes smoothly. Take April of 2025 for example. Early in the month, the Trump administration caught investors off guard by announcing a series of tariffs way higher and way earlier than expected. The announcement, and the inconsistent messaging that followed, set off a wild, weeks-long stretch of trading. Prices of some securities cratered in the morning only to recover by day's end. Our systems not only weathered this storm, but capitalized on it, taking advantage of small windows of time to harvest tens of millions of dollars in temporary losses for customers before prices recovered. This strategy of tax loss harvesting helps sprinkle tax advantages on a portion of customers' taxable investing, and it wouldn’t be possible without the help of those aforementioned secondary tickers. These funds help reduce “wash sales” while maintaining customers’ desired exposures and risk levels. Something delicious is simmering The image of a golden harvest is an apt one, considering this series looks at our Investing team's work through a culinary lens. Many of our customers come to us not necessarily for a single serving of returns, but to plant the seeds for self-sustaining, long-term wealth. A harvest that supports a more-fulfilling life. Cara and the rest of our Capital Markets experts are a big part of that lifecycle, tending to thousands of daily trades that optimize our customers’ portfolios over and over again. That's the beauty of using technology as a tool to expand our own capabilities and deliver results at scale. It's a people-led process. We became a trusted leader in automated money management not because of our tech, but because of the people who build and use it each day. Specialists like Cara, Josh, and Jamie—They're our secret ingredient, working in service of customers hungry for a better way to invest. Bon appétit.

Inside the investing kitchen, part 1 Jun 24, 2025 11:30:00 AM The recipe for a better portfolio, and the science behind a safer nest egg. Jamie Lee isn’t a Top Chef, but he knows his way around the kitchen. He dabbles in sous vide with the help of a sous chef (his 6-year-old daughter). He loves smoking salmon low and slow on a pair of pellet grills. And in some ways, his day job on the Betterment Investing team resembles the culinary world as well. He and his teammates work in a test kitchen of sorts, defining and refining the recipes for our low-cost, high-performing, and globally-diversified portfolios. They size up ingredients, pair flavors, and thoughtfully assemble the courses of each “meal.” All in service of customers with varying appetites for risk. It's highly-technical work, but we wouldn't be Betterment if we didn't make our methodologies as accessible as possible. So whether you're kicking the tires on our services, or you're already a customer and simply curious about the mechanics of your money machine, come along for a three-part, behind-the-scenes look at how we cook up a better portfolio. Here in part 1, we'll explore how we allocate your investing at a high level. In part 2, we'll zoom in to our process for selecting specific funds. And in part 3, we'll show you how we handle thousands of trades each day to keep our customers’ portfolios in tip-top shape. The science behind a safer nest egg Betterment customers rely on Jamie and team to do the heavy lifting of portfolio construction. They distill handfuls of asset classes, a hundred-plus risk levels, and thousands of funds into a simple yet eclectic menu of investment options. And underpinning much of this process is something called Modern Portfolio Theory, a framework developed by the late American economist Harry Markowitz. The theory revolutionized how investors think about risk, and led to Markowitz winning the Nobel Prize in 1990. Diversification lies at the heart of Modern Portfolio Theory. The more of it your investing has, the theory goes, the less risk you're exposed to. But that barely scratches the surface. One of the meatiest parts of building a portfolio (and by extension, diversifying your investing) is how much weight to give each asset class, also known as asset allocation. Broadly speaking, you have stocks and bonds. But you can slice up the pie in several other ways. There’s large cap companies or less established ones. Government debt or the corporate variety. And even more relevant as of late: American markets or international. Jamie came of age in South Korea during the late 90s. Back here in the States, the dot-com bubble was still years away from popping. But in South Korea and Asia more broadly, a financial crisis was well underway. And it changed the trajectory of Jamie’s career. His interest in and application of math shifted from computer science to the study of markets, and ultimately led to a PhD in statistics. Jamie Lee (right) helps optimize the weights of asset classes in Betterment portfolios. For Jamie, the interplay of markets at a global level is fascinating. So it’s only fitting that when optimizing asset allocations for customers, Jamie and team start with the hypothetical "global market portfolio," an imaginary snapshot of all the investable assets in the world. The current value of U.S. stocks, for example, represents about two-thirds the value of all stocks, so it's weighted accordingly in the global market portfolio. These weights are the jumping off point for a key part of the portfolio construction process: projecting future returns. Reverse engineering expected returns “Past performance does not guarantee future results.” We include this type of language in all of our communications at Betterment, but for quantitative researchers, or “quants,” like Jamie, it’s more than a boilerplate. It’s why our forecasts for the expected returns of various asset classes largely aren't based on historical performance. They're forward-looking. "Past data is simply too unreliable," says Jamie. "Look at the biggest companies of the 90s; that list is completely different from today.” So to build our forecasts, commonly referred to in the investing world as Capital Market Assumptions, we pretend for a moment that the global market portfolio is the optimal one. Since we know roughly how each of those asset classes performs relative to one another, we can reverse engineer their expected returns. This robust math is represented by a deceivingly short equation—μ = λ Σ ωmarket—which you can read more about in our full portfolio construction methodology. From there, we simulate thousands of paths for the market, factoring in both our forecasts and those of large asset managers like BlackRock to find the optimal allocation for each path. Then we average those weights to land on a single recommendation. This “Monte Carlo" style of simulations is commonly used in environments filled with variables. Environments like, say, capital markets. The outputs are the asset allocation percentages (refreshed each year) that you see in the holdings portion of your portfolio details Hypothetical portfolio; for illustration only At this point in the journey, however, our Investing team's work is hardly finished. They still need to seek out some of the most cost-effective, and just plain effective, funds that give you the intended exposure to each relevant asset class. For this, we need to head out of the test kitchen and into the market. So don’t forget your tote bag.

Inside the investing kitchen, part 2 Jun 24, 2025 11:25:00 AM See how we source the higher-quality, lower-cost funds that fill up your portfolio. A lot goes into the making of a single Betterment portfolio. So much that we're spreading out this showcase of our Investing team's work over three parts. In part 1, we explore how we allocate customers’ investing at a high level, and in part 3, we show how we handle thousands of trades each day to keep their portfolios humming. And here in part 2, we zoom into a topic that may be a little more relatable for the everyday investor: picking the actual investments themselves. If asset allocation is like refining a recipe, then today's topic of fund selection is all about the sourcing of higher-quality, lower-cost ingredients. And for that, we turn our eye toward a market of another kind. Josh Shrair specializes in shopping capital markets here at Betterment, picking the funds that fill up your portfolio's respective allocations. His line of work looked a little different decades ago, back when his step dad was working as a trader on Wall Street. Back then, this level of attention to portfolio construction and fund selection was typically in service of only the ultra wealthy. But now, Josh and team navigate a rapidly-expanding universe of investments on behalf of everyday investors. Why shopping for funds isn't always so simple On one hand, the recent explosion of investment options has been great for investors. Increased competition drives down costs and opens up access to newer, more niche markets. But more choice also leads to more complexity. Take Exchange Traded Funds (ETFs), our preferred building block for portfolios thanks to their transparency, tax efficiency, and lower costs. They bundle up hundreds, and sometimes thousands, of individual stocks and bonds. But even ETFs are multiplying fast. In 2024 alone, 723 new ones launched, bringing the total to nearly 4,000. To illustrate this abundance, let's say your asset allocation calls for a heaping serving of “Large Cap” stocks, meaning companies valued at $10 billion or more. Nearly 500 ETFs populate this particular corner of the ETF universe. We can narrow that group down to 30 based on the specific exposure we’re looking for, like say U.S. Large Cap companies, or the S&P 500, a list or “index” of 500 of the biggest American companies. But the due diligence is hardly done. Some ETFs that track the S&P 500 follow it faithfully, while others put their own spin on it, which can open investors up to unintended exposure. Josh Shrair (second from left) helps navigate a rapidly-expanding universe of ETFs on behalf of Betterment customers. Just as crucially, their costs are all over the place, and higher fees can erode your returns in the long run. That's why the SPDR fund is currently our Core portfolio’s primary way of achieving U.S. Large Cap stock exposure. It offers both a low cost to hold (0.02%) and a low cost to trade (0.03% at the time of writing), making for a low overall cost of ownership. "Shopping for investments is a little like buying a car," Josh says. "The total cost is way more than the sticker price." How we calculate cost of ownership Part of our role as a fiduciary, someone who's legally obligated to act in their clients' best interests, is conducting a deep and unbiased evaluation of the ETFs used in our portfolios. The process Josh and team use is entirely "open architecture," meaning we’re not obligated to use funds from any particular provider. Instead, we strive to select the most optimal ones in terms of cost and exposure. It helps that Betterment itself doesn't make, manage, and sell funds, which means we avoid the inherent conflict of interest some advisors face when they also act as a fund manager. These firms can be tempted to steer customers toward their own funds, even when a better alternative exists. So we take pride in the due diligence behind our fund selection, and that begins with our "cost of ownership" scoring methodology. It factors in the two types of costs mentioned earlier: the cost to "hold" or own a fund, also known as its expense ratio, and the cost to trade it. As you'll see in part 3 of this series, a portfolio is hardly static. Deposits come in. Withdrawals go out. Rebalancing takes place on the regular. All of this requires daily trading, so the cost of those transactions matters to your investing's bottom line. The cost-to-trade is also known as the "bid-ask spread," or the markup that traders expect when selling a share. It's how they make money, and similar to wholesalers and retailers like Costco, the bigger the fund, the smaller the margins a trader can live with. Seeking out these value buys is how we're able to deliver globally-diversified portfolios at a fraction of the cost of alternatives on the market today. And we’re never done shopping. Our preferred funds are updated multiple times throughout the year. Primed for the purchase There's a lot more to our fund selection methodology, especially for funds that aren’t tied to a specific index, but are instead made from scratch. Some fund managers like Goldman Sachs, where Josh worked earlier in his career, also blend both approaches into a “smart beta” strategy. We offer one such portfolio alongside our Betterment-built collections. But for the sake of this series, let's pretend for a moment that our tote bags are full, and we're ready to check out. It’s time to meet the team behind every transaction at Betterment.

Our Socially Responsible Investing portfolios methodology Mar 31, 2025 7:00:00 AM Learn how we construct our Socially Responsible Investing (SRI) portfolios. Table of Contents Introduction How do we define SRI? The Challenges of SRI Portfolio Construction How is Betterment’s Broad Impact portfolio constructed? How is Betterment’s Climate Impact portfolio constructed? How is Betterment’s Social Impact portfolio constructed? Conclusion Introduction Betterment launched its first Socially Responsible Investing (SRI) portfolio in 2017, and has widened the investment options under that umbrella since then. Within Betterment’s SRI options, we currently offer a Broad Impact portfolio and two additional, more focused SRI portfolio options: a Social Impact SRI portfolio (focused on social empowerment) and a Climate Impact SRI portfolio (focused on climate-conscious investments). These portfolios represent a diversified, relatively low-cost solution constructed using exchange traded funds (ETFs), which will be continually improved upon as costs decline, more data emerges, and as a result, the availability of SRI funds broadens. How do we define SRI? Our approach to SRI has three fundamental dimensions that shape our portfolio construction mandates: Reducing exposure to investments involved in unsustainable activities and environmental, social, or governmental controversies. Increasing exposure to investments that work to address solutions for core environmental and social challenges in measurable ways. Allocating to investments that use shareholder engagement tools, such as shareholder proposals and proxy voting, to incentivize socially responsible corporate behavior. SRI is the traditional name for the broad concept of values-driven investing (many experts now favor “sustainable investing” as the name for the entire category). Our SRI approach uses SRI mandates based on a set of industry criteria known as “ESG,” which stands for Environmental, Social and Governance. ESG refers specifically to the quantifiable dimensions of a company’s standing along each of its three components. Betterment’s approach expands upon the ESG-investing framework with exposure to investments that use complementary shareholder engagement tools. Betterment does not directly select companies to include in, or exclude from, the SRI portfolios. Rather, Betterment identifies ETFs that have been classified as ESG or similar by third-parties and considers internally developed “SRI mandates” alongside other qualitative and quantitative factors to select ETFs to include in its SRI portfolios. Using SRI Mandates One aspect of improving a portfolio’s ESG exposure is reducing exposure to companies that engage in certain activities that may be considered undesirable because they do not align with specific values. These activities may include selling tobacco, military weapons, civilian firearms, as well as involvement in recent and ongoing ESG controversies. However, SRI is about more than just adjusting your portfolio to minimize companies with a poor social impact. For each Betterment SRI portfolio, the portfolio construction process considers one or more internally developed “SRI mandates.” Betterment’s SRI mandates are sustainable investing objectives that we include in our portfolios’ exposures. SRI Mandate Description Betterment SRI Portfolio Mapping ESG Mandate ETFs tracking indices which are constructed with reference to some form of ESG optimization, which promotes exposure to Environmental, Social, and Governance pillars. Broad, Climate, Social Impact Portfolios Fossil Fuel Divestment Mandate ETFs tracking indices which are constructed with the aim of excluding stocks in companies with major fossil fuels holdings (divestment). Climate Impact Portfolio Carbon Footprint Mandate ETFs tracking indices which are constructed with the aim of minimizing exposure to carbon emissions across the entire economy (rather than focus on screening out exposure to stocks primarily in the energy sector). Climate Impact Portfolio Green Financing Mandates ETFs tracking indices focused on financing environmentally beneficial activities directly. Climate Impact Portfolio Gender Equity Mandate ETFs tracking indices which are constructed with the aim of representing the performance of companies that seek to advance gender equality. Social Impact Portfolio Social Equity Mandate ETFs managed with the aim of obtaining exposures in investments that seek to advance vulnerable, disadvantaged, or underserved social groups. The Gender Equity Mandate also contributes to fulfilling this broader mandate. Social Impact Portfolio Shareholder Engagement Mandate In addition to the mandates listed above, Betterment’s SRI portfolios are constructed using a shareholder engagement mandate. One of the most direct ways a shareholder can influence a company’s decision making is through shareholder proposals and proxy voting. Publicly traded companies have annual meetings where they report on the business’s activities to shareholders. As a part of these meetings, shareholders can vote on a number of topics such as share ownership, the composition of the board of directors, and executive level compensation. Shareholders receive information on the topics to be voted on prior to the meeting in the form of a proxy statement, and can vote on these topics through a proxy card. A shareholder can also make an explicit recommendation for the company to take a specific course of action through a shareholder proposal. ETF shareholders themselves do not vote in the proxy voting process of underlying companies, but rather the ETF fund issuer participates in the proxy voting process on behalf of their shareholders. As investors signal increasing interest in ESG engagement, more ETF fund issuers have emerged that play a more active role engaging with underlying companies through proxy voting to advocate for more socially responsible corporate practices. These issuers use engagement-based strategies, such as shareholder proposals and director nominees, to engage with companies to bring about ESG change and allow investors in the ETF to express a socially responsible preference. For this reason, Betterment includes a Shareholder Engagement Mandate in its SRI portfolios. Mandate Description Betterment SRI Portfolio Mapping Shareholder Engagement Mandate ETFs which aim to fulfill one or more of the above mandates, not via allocation decisions, but rather through the shareholder engagement process, such as proxy voting. Broad, Climate, Social Impact Portfolios The Challenges of SRI Portfolio Construction For Betterment, three limitations have a large influence on our overall approach to building an SRI portfolio: 1. Many existing SRI offerings in the market have serious shortcomings. Many SRI offerings today sacrifice sufficient diversification appropriate for investors who seek market returns, and/or do not provide investors an avenue to use collective action to bring about ESG change. Betterment’s SRI portfolios do not sacrifice global diversification. Consistent with our core principle of global diversification and to ensure both domestic and international bond exposure, we’re still allocating to some funds without an ESG mandate, until satisfactory solutions are available within those asset classes. Additionally, all three of Betterment’s SRI portfolios include a partial allocation to an engagement-based socially responsible ETF using shareholder advocacy as a means to bring about ESG-change in corporate behavior. Engagement-based socially responsible ETFs have expressive value in that they allow investors to signal their interest in ESG issues to companies and the market more broadly, even if particular shareholder campaigns are unsuccessful. 2. Integrating values into an ETF portfolio may not always meet every investor’s expectations. For investors who prioritize an absolute exclusion of specific types of companies above all else, certain approaches to ESG will inevitably fall short of expectations. For example, many of the largest ESG funds focused on US Large Cap stocks include some energy companies that engage in oil and natural gas exploration, like Hess. While Hess might not meet the criteria of the “E” pillar of ESG, it could still meet the criteria in terms of the “S” and the “G.” Understanding that investors may prefer to focus specifically on a certain pillar of ESG, Betterment has made three SRI portfolios available. The Broad Impact portfolio seeks to balance each of the three dimensions of ESG without diluting different dimensions of social responsibility. With our Social Impact portfolio, we sharpen the focus on social equity with partial allocations to gender diversity and veteran impact focused funds. With our Climate Impact portfolio, we sharpen the focus on controlling carbon emissions and fostering green solutions. 3. Most available SRI-oriented ETFs present liquidity limitations. While SRI-oriented ETFs have relatively low expense ratios compared to SRI mutual funds, our analysis revealed insufficient liquidity in many ETFs currently on the market. Without sufficient liquidity, every execution becomes more expensive, creating a drag on returns. Median daily dollar volume is one way of estimating liquidity. Higher volume on a given asset means that you can quickly buy (or sell) more of that asset in the market without driving the price up (or down). The degree to which you can drive the price up or down with your buying or selling must be treated as a cost that can drag down on your returns. To that end, Betterment reassesses the funds available for inclusion in these portfolios regularly. In balancing cost and value for the portfolios, the options are limited to funds of certain asset classes such as US stocks, Developed Market stocks, Emerging Market stocks, US Investment Grade Corporate Bonds, US High Quality bonds, and US Mortgage-Backed Securities. How is Betterment’s Broad Impact portfolio constructed? Betterment’s Broad Impact portfolio invests assets in socially responsible ETFs to obtain exposure to both the ESG and Shareholder Engagement mandates, as highlighted in the table above. It focuses on ETFs that consider all three ESG pillars, and includes an allocation to an engagement-based SRI ETF. Broad ESG investing solutions are currently the most liquid, highlighting their popularity amongst investors. In order to maintain geographic and asset class diversification and to meet our requirements for lower cost and higher liquidity in all SRI portfolios, we continue to allocate to some funds that do not reflect SRI mandates, particularly in bond asset classes. How is Betterment’s Climate Impact portfolio constructed? Betterment offers a Climate Impact portfolio for investors that want to invest in an SRI strategy more focused on the environmental pillar of “ESG” rather than focusing on all ESG dimensions equally. Betterment’s Climate Impact portfolio invests assets in socially responsible ETFs and is constructed using the following mandates that seek to achieve divestment and engagement: ESG, carbon footprint reduction, fossil fuel divestment, shareholder engagement, and green financing. The Climate Impact portfolio was designed to give investors exposure to climate-conscious investments, without sacrificing proper diversification and balanced cost. Fund selection for this portfolio follows the same guidelines established for the Broad Impact portfolio, as we seek to incorporate broad based climate-focused ETFs with sufficient liquidity relative to their size in the portfolio. How can the Climate Impact portfolio help to positively affect climate change? The Climate Impact portfolio is allocated to iShares MSCI ACWI Low Carbon Target ETF (CRBN), an ETF which seeks to track the global stock market, but with a bias towards companies with a lower carbon footprint. By investing in CRBN, investors are actively supporting companies with a lower carbon footprint, because CRBN overweights these stocks relative to their high-carbon emitting peers. One way we can measure the carbon impact a fund has is by looking at its weighted average carbon intensity, which measures the weighted average of tons of CO2 emissions per million dollars in sales, based on the fund's underlying holdings. Based on weighted average carbon intensity data from MSCI, Betterment’s 100% stock Climate Impact portfolio has carbon emissions per unit sales that are more than 47% lower than Betterment’s 100% stock Core portfolio as of March 12, 2025. Additionally, a portion of the Climate Impact portfolio is allocated to fossil fuel reserve funds. Rather than ranking and weighting funds based on a certain climate metric like CRBN, fossil fuel reserve free funds instead exclude companies that own fossil fuel reserves, defined as crude oil, natural gas, and thermal coal. By investing in fossil fuel reserve free funds, investors are actively divesting from companies with some of the most negative impact on climate change, including oil producers, refineries, and coal miners such as Chevron, ExxonMobile, BP, and Peabody Energy. Another way that the Climate Impact portfolio promotes a positive environmental impact is by investing in bonds that fund green projects. The Climate Impact portfolio invests in iShares Global Green Bond ETF (BGRN), which tracks the global market of investment-grade bonds linked to environmentally beneficial projects, as determined by MSCI. These bonds are called “green bonds.” The green bonds held by BGRN fund projects in a number of environmental categories defined by MSCI including alternative energy, energy efficiency, pollution prevention and control, sustainable water, green building, and climate adaptation. How is Betterment’s Social Impact portfolio constructed? Betterment offers a Social Impact portfolio for investors that want to invest in a strategy more focused on the social pillar of ESG investing (the S in ESG). Betterment’s Social Impact portfolio invests assets in socially responsible ETFs and is constructed using the following mandates: ESG, gender equity, social equity, and shareholder engagement. The Social Impact portfolio was designed to give investors exposure to investments which promote social empowerment without sacrificing proper diversification and balanced cost. Fund selection for this portfolio follows the same guidelines established for the Broad Impact portfolio discussed above, as we seek to incorporate broad based ETFs that focus on social empowerment with sufficient liquidity relative to their size in the portfolio. How does the Social Impact portfolio help promote social empowerment? The Social Impact portfolio shares many of the same holdings as Betterment’s Broad Impact portfolio. The Social Impact portfolio additionally looks to further promote the “social” pillar of ESG investing by allocating to the following ETFs: SPDR SSGA Gender Diversity Index ETF (SHE) Academy Veteran Impact ETF(VETZ) Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) SHE is a US Stock ETF that allows investors to invest in more female-led companies compared to the broader market. In order to achieve this objective, companies are ranked within each sector according to their ratio of women in senior leadership positions. Only companies that rank highly within each sector are eligible for inclusion in the fund. By investing in SHE, investors are allocating more of their money to companies that have demonstrated greater gender diversity within senior leadership than other firms in their sector. VETZ, the Academy Veteran Impact ETF, is a US Bond ETF and is the first publicly traded ETF to primarily invest in loans to U.S. service members, military veterans, their survivors, and veteran-owned businesses. A majority of the underlying assets consist of loans to veterans or their families. The fund primarily invests in Mortgage-Backed Securities that are guaranteed by government-sponsored enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac. The fund also invests in pools of small business loans backed by the Small Business Administration (SBA). JUST, Goldman Sachs JUST U.S. Large Cap Equity ETF, invests in U.S. companies promoting positive change on key social issues, such as worker wellbeing, customer privacy, environmental impact, and community strength, based on the values of the American public as identified by JUST Capital’s polling. Investment in socially responsible ETFs varies by portfolio allocation; not all allocations include the specific ETFs listed above. For more information about these social impact ETFs, including any associated risks, please see our disclosures. Should we expect any difference in an SRI portfolio’s performance? One might expect that a socially responsible portfolio could lead to lower returns in the long term compared to another, similar portfolio. The notion behind this reasoning is that somehow there is a premium to be paid for investing based on your social ideals and values. A white paper written in partnership between Rockefeller Asset Management and NYU Stern Center for Sustainable Business studied 1,000+ research papers published from 2015 to 2020 analyzing the relationship between ESG investing and performance. The primary takeaway from this research was that they found “positive correlations between ESG performance and operational efficiencies, stock performance, and lower cost of capital.” When ESG factors were considered in the study, there seemed to be improved performance potential over longer time periods and potential to also provide downside protection during periods of crisis. It’s important to note that performance in the SRI portfolios can be impacted by several variables, and is not guaranteed to align with the results of this study. Dividend Yields Could Be Lower Using the SRI Broad Impact portfolio for reference, dividend yields over a one-year period ending March 31, 2025 indicate that SRI income returns at certain risk levels have been lower than those of the Core portfolio. Oil and gas companies like BP, Chevron, and Exxon, for example, currently have relatively high dividend yields, and excluding them from a given portfolio can cause its income return to be lower. Of course, future dividend yields are uncertain variables and past data may not provide accurate forecasts. Nevertheless, lower dividend yields can be a factor in driving total returns for SRI portfolios to be lower than those of Core portfolios. Comparison of Dividend Yields Source: Bloomberg, Calculations by Betterment for one year period ending March 31, 2025. Dividend yields for each portfolio are calculated using the dividend yields of the primary ETFs used for taxable allocations of Betterment’s portfolios as of March 2025. Conclusion Despite the various limitations that all SRI implementations face today, Betterment will continue to support its customers in further aligning their values to their investments. Betterment may add additional socially responsible funds to the SRI portfolios and replace other ETFs as the investing landscape continues to evolve.

ETF selection methodology Mar 20, 2025 8:00:00 AM When constructing a portfolio, Betterment focuses on exchange-traded funds (“ETFs”) with generally low costs and high liquidity. In the following piece, we detail Betterment’s investment selection methodology, including: Why ETFs Cost of Ownership (CO) Mitigating market impact Actively-managed investments Conclusion 1. Why ETFs? When constructing a portfolio, Betterment focuses on exchange-traded funds (“ETFs”) with generally low costs and high liquidity. An ETF is essentially a basket which contains underlying securities, such as stocks and bonds, and generally come in two different flavors: passive (or index tracking) and active. By design, passive index ETFs closely track their benchmarks—such as the S&P 500. On the other hand, active ETFs represent a group of hand-selected securities decided upon by a portfolio manager with the intention of beating a benchmark. Additionally, ETFs have certain structural advantages when compared to mutual funds. These include: A. Clear goals and mandates Betterment generally selects ETFs that have mandates to passively track broad-market benchmark indexes. A passive mandate explicitly restricts the fund administrator to the singular goal of replicating a benchmark rather than making active investment decisions in an effort to beat the fund’s underlying benchmark. We largely favor such transparency and lower idiosyncratic market risk, yet some asset classes may benefit from fundamental research-driven security selection, and in some instances, Betterment employs the use of active ETFs managed by experienced external portfolio management teams (more on that below). B. Intraday availability ETFs are transactable during all open market hours just like any other stock. As such, they are heavily traded by the full spectrum of equity market participants including market makers, short-term traders, buy-and-hold investors, and fund administrators themselves creating and redeeming units as needed (or increasing or decreasing the supply of ETFs based on market demand). This diverse trading activity leads to most ETFs carrying low liquidity premiums (or lower costs to transact due to competition from readily available market participants pushing prices downward) and equity-like transaction times irrespective of the underlying holdings of each fund. This generally makes ETFs fairly liquid, which makes them cheaper and easier to trade on-demand for activities like creating a new portfolio or rebalancing an existing one. C. Low-fee structures Because most benchmarks update constituents (i.e., the specific stocks and related weights that make up a broad-market index) fairly infrequently, passive index-tracking ETFs also register lower annual turnover (or the rate a fund tends to transact its holdings) and thus fewer associated costs are passed through to investors. In addition, ETFs are generally managed by their administrators as a single share class that holds all assets as a single entity. This structure naturally lends itself as a defense against administrators practicing fee discrimination across the spectrum of available investors. With only one share class, ETFs are investor-type agnostic. The result is that ETF administrators provide the same exposures and low fees to the entire spectrum of potential buyers. Where actively-managed ETFs are utilized in Betterment portfolios, fees and expenses remain a critical aspect of our decision making.Our selection process will favor active over passive when we strongly believe the value added by an active manager outweighs its likely higher expense ratio.. D. Tax efficiency In the case when a fund (irrespective of its specific structure) sells holdings that have experienced capital appreciation, the capital gains generated from those sales must, by law, be accrued and distributed to shareholders by year-end in the form of distributions. These distributions increase tax liabilities for all of the fund’s shareholders. With respect to these distributions, ETFs offer a significant tax advantage for shareholders over mutual funds. Because mutual funds are not exchange traded, the only available counterparty available for a buyer or seller is the fund administrator. When a shareholder in a mutual fund wishes to liquidate their holdings in the fund, the fund’s administrator must sell securities in order to generate the cash required to satisfy the redemption request. These redemption-driven sales generate capital gains that lead to distributions for not just the redeeming investor, but all shareholders in the fund. Mutual funds thus effectively socialize the fund’s tax liability to all shareholders, leading to passive, long-term investors having to help pay a tax bill for all intermediate (and potentially short-term) shareholder transactions. Because ETFs are exchange-traded, the entire market serves as potential counterparties to a buyer or seller. When a shareholder in an ETF wishes to liquidate their holdings in the fund, they simply sell their shares to another investor just like that of a single company’s equity shares. The resulting transaction would only generate a capital gain or loss for the seller and not all investors in the fund. In addition, ETFs enjoy a slight advantage when it comes to taxation on dividends paid out to investors. After the passing of the Jobs and Growth Tax Relief Reconciliation Act of 2003, certain qualified dividend payments from corporations to investors are only subject to the lower long-term capital gains tax rather than standard income tax (which is still in force for ordinary, non-qualified dividends). Qualified dividends have to be paid by a domestic corporation (or foreign corporation listed on a domestic stock exchange) and must be held by both the investor and the fund for 61 of the 120 days surrounding the dividend payout date. As a result of active mutual funds’ higher turnover, a higher percentage of dividends paid out to their investors violate the holding period requirement and increase investor tax profiles. E. Investment flexibility The maturation and growth of the global ETF market over the past few decades has led to the development of an immense spectrum of products covering different asset classes, markets, styles, and geographies. The result is a robust market of potential portfolio components which are versatile, extremely liquid, and easily substitutable. Despite all the advantages of ETFs, it is still important to note that not all ETFs are exactly alike or equally beneficial to an investor. Betterment’s investment selection process seeks to select ETFs that provide exposure to the desired asset classes. For certain asset classes where markets are more efficient, we seek to achieve these asset class exposures through passively managed ETFs due to its cost-effectiveness. Alternatively, where Betterment utilizes active management, we conduct rigorous analysis and due diligence to best understand the trade-off of benchmark deviation for potential performance benefit. The cornerstone of Betterment’s approach to investment selection is our “Cost of Ownership” or CO, allowing us to effectively rank and select ETFs based upon their fees to hold and cost to trade. 2. Cost of Ownership (CO) The Cost of Ownership (“CO”) is Betterment’s fund scoring method, used to rate funds for inclusion in the Betterment portfolio. CO takes into account an ETF’s transactional costs as well as costs associated with holding funds. In addition to CO, Betterment also considers certain other qualitative factors of ETFs, particularly when Betterment considers the use of actively-managed funds. Qualitative factors may include, but are not limited to whether the ETF fulfills a desired portfolio mandate and/or exposure and due diligence interviews with portfolio management teams. CO is determined by two components, a fund’s cost-to-trade and cost-to-hold. The first, cost-to-trade, represents the cost associated with trading in and out of funds during the course of regular investing activities, such as rebalancing, cash inflows or withdrawals, and tax loss harvesting. Betterment defines the the cost-to-trade as the bid-ask spread, or the difference between the price at which you can buy a security and the price at which you can sell the same security at any given time. The second component, cost-to-hold, is represented by the ETF’s expense ratio, or the fund expenses imposed by an ETF administrator. Let’s review the specific inputs to each component in more detail: Cost-to-Trade: Bid-Ask spread Bid-Ask spread: Generally market transactions are associated with two prices: the price at which people are willing to sell a security, and the price others are willing to pay to buy it. The difference between these two numbers is known as the bid-ask spread, and can be expressed in currency or percentage terms. For example, a trader may be happy to sell a share at $100.02, but only wishes to buy it at $99.98. The bid-ask currency spread here is $.04, which coincidentally also represents a bid-ask percentage of 0.04%. In this example, if you were to buy a share, and immediately sell it, you’d end up with 0.04% less due to the spread. This is how traders and market makers make money—by providing liquid access to markets for small margins. Generally, heavily-traded securities with more competitive counterparties willing to transact will carry lower bid-ask spreads. Unlike the expense ratio, the degree to which you care about bid-ask spread likely depends on how actively you trade. Buy-and-hold investors typically care about it less compared to active traders, because they will accrue significantly fewer transactions over their intended investment horizons. Minimizing these costs is beneficial to building an efficient portfolio which is why Betterment attempts to select ETFs with narrower bid-ask spreads. Cost-to-Hold: Expense ratio Expense ratio: An expense ratio is the set percentage of the price of a single share paid by shareholders to the fund administrators every year. ETFs often collect these fees from the dividends passed through from the underlying assets to holders of the security, which result in lower total returns to shareholders. Finding cost of ownership We calculate CO as the sum of the above components: CO = "Cost-to-Trade" + "Cost-to-Hold" Where Cost-to-trade = 0.5 * bid-ask spread As mentioned above, cost-to-trade estimates the costs associated with buying and selling funds in the open market. This amount is weighted to appropriately represent the aggregate investing activities of the average Betterment client in terms of cash flows, rebalances, and tax loss harvests. Additionally, we utilize ½ of the bid-ask spread in our calculations as this mid-point is generally what customers realize in terms of trade costs. The cost-to-hold represents our expectations of the annual costs an investor will incur from owning a fund as defined by the fund’s expense ratio In many cases, cost-to-hold, which includes an ETF’s expense ratio, will be the dominant factor in the total cost calculations. Of course, one can’t hold a security without first purchasing it, so we must also account for transaction costs, which we accomplish with our cost-to-trade component. 3. Minimizing market impact Market impact, or the change in price caused by an investor buying or selling a fund, is incorporated into Betterment’s total cost number through the cost-to-trade component. This is specifically through the interaction of bid-ask spreads. However, we do review and monitor other trading-related metrics not represented specifically in the CO calculation when evaluating our universe of investable funds. Additional metrics include whether the ETF has relatively high levels of existing assets under management and average daily traded volumes. This helps to ensure that Betterment’s trading activity and holdings will not dominate the security’s natural market efficiency, which could either drive the price of the ETF up or down when trading. ETFs without an appropriate level of assets or daily trade volume might lead to a situation where Betterment’s activity on behalf of clients moves the existing market for the security. In an attempt to avoid potentially negative effects upon our investors, we generally do not consider ETFs with smaller asset bases and limited trading activity unless some other extenuating factor is present. 4. Actively-managed investments Compared to passive investments which track a broad-market index, actively-managed ones seek to outperform their benchmark index by selecting and weighting securities based on a fundamental company research or market outlook. Betterment believes that certain markets may favor active management, and therefore, are less efficient than others, resulting in an opportunity where value may be added through actively-managed investments Given this, Betterment believes that a rigorous due diligence process can help identify favorable active managers who have developed a time-tested research-driven investment process. Additionally, while active management may have the potential to add return potential, Betterment continues to hold true to its Core portfolio construction philosophy, prioritizing cost-efficiency. This results in the continued evaluation of any actively-managed investment strategies we utilize with their ability to beat the benchmark vs. their, typically, higher expense ratio. Conclusion As with any investment, ETFs are subject to market risk, including the possible loss of principal. The value of any portfolio will fluctuate with the value of the underlying securities. ETFs may trade for less than their net asset value (NAV). There is always a risk that an ETF will not meet its stated objective on any given trading day. Betterment reviews its investment selection analysis on a periodic basis to assess: the validity of existing selections, potential changes by fund administrators (raising or lowering expense ratios), and changes in specific ETF market factors,including tighter bid-ask spreads). Additionally, Betterment undertakes qualitative due diligence to enhance our selection process for actively-managed investments. Finally, at the core of our portfolio construction process, we are constantly considering the tax implications of portfolio selection changes and estimates the net benefit of transitioning between investment vehicles for our clients.

How we keep your Betterment account and investments safe Feb 19, 2025 9:00:00 AM So you can invest with peace of mind All investing comes with some risk. But that risk should be based on the market, not your broker. That’s why we safeguard both your Betterment account and your investments with multiple security measures, all so you can log in and invest or save with peace of mind. Here’s a sampling. Four ways we keep your Betterment account safe Two-factor authentication Two-factor authentication (2FA) adds an extra layer of security to your account, like an extra lock on a door. Besides your regular password, 2FA requires a second form of verification such as a code texted to your phone (good) or one served up by an authenticator app like Google Authenticator (even more secure). This helps ensure that even if someone manages to get hold of your Betterment password, they still can't access your account without a second form of verification. Encryption Every time you interact with us, whether on our website or our app, your data is protected by encrypted connections. This means that the information transmitted between your device and our servers is scrambled in a way that only we can understand. Password hashing When you create a password for your Betterment account, it's not stored in plain text. Instead, we use a process called hashing, which converts your password into a unique string of characters. This way, even if our systems were breached, your actual password would remain unknown and unusable by unauthorized parties. App passwords Connecting third-party apps to your Betterment account (or vice versa) unlocks several benefits. You can easily track your net worth on Betterment, for example. Or quickly import your Betterment tax forms to certain tax prep software. When a third-party app asks for your Betterment credentials, instead of using your regular login, we ask you to create a password specifically for that app. In the scenario the third-party app’s connection is compromised, you can easily revoke its read-only access to your Betterment account. Note that some apps may use the OAuth standard, which lets you use your regular login while maintaining a similar level of security as an app password. TurboTax is one such example. Four ways we keep your investments safe Easy verification of holdings Transparency is one of our key principles, so we make it easy to verify everything is in its right place. We not only show each trade made on your behalf and the precise number of shares in which you’re invested, we also list each fractional share sold and the respective gross proceeds and cost basis for each. You can find all this information in the Holdings and Activity tabs for each of your goals. Independent oversight We regularly undergo review by independent auditors. This means auditors reconcile every share and every dollar we say we have against our actual holdings. They also spot check random customer accounts and verify that account statements match our internal records. And they ask questions if anything is even a penny off. No commingling of funds Your funds are kept separate from Betterment’s operational funds. This means that your investments are held in your name and are never mixed with our company finances. In the unlikely event we face financial difficulties, your assets remain secure and untouched. SIPC insurance To add another layer of protection, your Betterment securities are insured by the Securities Investor Protection Corporation (SIPC). This insurance covers up to $500,000 per customer, including a $250,000 limit for cash claims. While SIPC doesn’t protect against market losses, it does provide a safety net in case of a brokerage failure. An explanatory brochure is available upon request or at sipc.org. How you can help In the end, the most important security measure is you. Be on the lookout for suspicious phone calls, texts, and emails (odd-looking URLs, typo-riddled messages, etc.) and know that Betterment will never ask you for your password or 2FA code except when logging in or editing your personal information in the app. Use a strong, unique password for your account, and don’t hesitate to contact us directly if you suspect a scam message and need to verify that we’ve reached out. We’ve got your back, and between the two of us, we can help keep bad actors at bay.