It’s almost 2017. That means we’re about to enter another year of giving our customers a better way to invest. Another year working to lower fees, lower taxes, and lower stress. And another year of working for our customers (ourselves, our family, and our friends) so that they can make the most of their money.

At Betterment, before we move forward, we like to take a look back—in pretty much everything we do, from building a new feature to hosting a company event, so we can learn, grow, and make it better the next time.

We’re grateful to our customers for such a fantastic year; it’s because of you that we’re able to continue improving our service—and there’s so much more to come! We never want to stop improving. So in the spirit of constant learning—something we at Betterment practice every day—let’s do a 2016 retrospective.

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Global Market Review

This year has been a great reminder that long-term gains nearly always involve short-term losses. 2016 opened with a bang: A 90% stock portfolio dropped about 10% in January and February. But, by April, those losses were recouped.

Then in June, just as people were getting comfortable with modest gains, the UK’s decision to leave the EU (Brexit) made markets tumble back into negative territory.

The run-up to the election in November provoked anxiety in the markets leading into November, yet our portfolio has generally risen since the uncertainty was resolved.

Performance of the Betterment Asset Classes in 2016

ticker-twr-over-2016
Source: Data from Xignite

Nearing the end of December 2016, a 90% stock IRA or 401(k) model portfolio is up 9.8% this year, and a 40% taxable model portfolio (for emergency funds) is up 5.7% (assuming 0.15% Betterment fee tier).1 If 2016 can be remembered for anything, it might be that it was unusual for delivering perfectly average returns in a perfectly average way—most years are above or below the average, rather than right on it.

Performance of Standard Betterment Model Portfolios in 2016

portfolio-tar-over-2016-02

Source: Data from Xignite, analysis by Betterment. The Betterment portfolio historical performance numbers are based on a backtest of the ETFs or indexes tracked by each asset class in a Betterment portfolio. All percentage returns include the Betterment fee (0.15% for $100K or more)2 and the expenses of the underlying ETFs. All values are nominal. More on these calculations can be found here.

Some people have been uncomfortable holding a global portfolio the past two to three years, as international developed stock markets have lagged U.S. markets. But 2016 reminds us that, over time, a globally diversified portfolio can provide the same expected returns with a lower level of expected volatility (AKA, risk). The chart below shows which stock markets (U.S., international developed, or international emerging) did best in each month in 2016. The U.S. market (represented by VTI) was only the best performer in three out of 12 months. We don’t know which markets will perform best going forward, so we’ll continue to spread our bets across all the markets.

Best Stock Asset Class Performance By Month in 2016

stock-rank-by-month

U.S. Total Stock Market represented by VTI, International Developed Stocks by VEA, Emerging Market Stocks by VWO.3

We Launched So Many Ways to Help You Invest Better—and a 401(k) Business

In 2016, we launched significant upgrades and extensions to our service that allow us to serve you better, and help you make the most of your money.

Tax Loss Harvesting+ for Married Couples Optimizes Investments Across Households

In June, we extended our ability to tax loss harvest across households. This allows Betterment customers to benefit from up to $3,000 in ordinary income offsets4 from harvesting tax losses each year. For married couples, Tax Loss Harvesting+ is designed to prevent inadvertent wash sales (where securities are sold and repurchased shortly thereafter) between two separate Betterment accounts or one joint Betterment account, and allows the IRS to consider joint account activity as one. Learn more about Tax Loss Harvesting+.

Tax-Coordinated Portfolio™ Can Increase Your Portfolio’s After-Tax Value By 15% Over 30 Years

In September, we launched a way to help shield your dividends from avoidable taxes. Why pay Uncle Sam more than you have to? This one-of-a-kind dividend shield, which we call Tax-Coordinated Portfolio (TCP), is something that would add value for many customers. As with so much of what we do for our customers, no one else offers anything like it. Here’s how it works: It looks across your accounts, and puts your assets that get taxed more (usually those that pay more dividends) in your IRAs (which have tax advantages). It allocates assets that get taxed less (usually those that pay fewer dividends) in your taxable accounts. As a result, our customers have the potential to wind up with an estimated 15% more in retirement spending money over 30 years. Learn more about Tax-Coordinated Portfolio.

We Signed on More Than 300 401(k) Plans in Less Than a Year

In January, we launched Betterment for Business, our response to a marketplace full of expensive, impersonal, and unguided 401(k) retirement solutions. The response has been overwhelming; in less than a year, we signed on more than 300 plans, from doctors’ offices and law firms to companies with more than 1,000 employees. Betterment for Business offers personalized managed accounts with holistic retirement planning advice across all your assets. If you’re interested bringing the Betterment experience to your employer’s 401(k), learn more at bettermentforbusiness.com.

Customers Can Now Sync External Accounts to Identify High Fees

In March, we gave customers the ability to sync external investment accounts. Not only does this allow you to see your total net worth in one place, but you can see all your Betterment and non-Betterment investments in one place, including portfolio allocations, investment holdings, and tips about how you could be earning more. Our customers have synced more than 250,000 outside accounts, allowing us to make them aware of high fees being charged on $1.7 billion of customer assets. The high fees amounted to $18 million that customers could have saved by switching investment providers. Idle cash (i.e., cash that’s losing value due to inflation because it’s not invested in the market) amounted to $1.6 billion. (Here are four reasons to sync your accounts with Betterment.)

Two-Factor Authentication and App Passwords

In December, we launched Two-Factor Authentication (2FA) and App Passwords.

2FA can help protect your Betterment account, even if an attacker has obtained your password. With 2FA enabled, each time you log in, you’ll be asked to enter a unique verification code from a mobile authenticator app, such as Authy or Google Authenticator, or a text that Betterment sends you.

App Passwords allow personal finance applications, such as Mint or TurboTax, to access your read-only financial information without giving them the ability to make any changes to your account.

What Else We’ve Done in 2016—By the Numbers

$68 million5: The amount of customer income we deferred through tax loss harvesting, lowering our customers’ taxes.

44 million: The number of times we efficiently traded on behalf of our customers, at no additional charge or commission.

4.8 billion: The number of shares we traded on behalf of our customers.

$184 million: The amount of dividends our customers have received.

186,373: The number of times our customers used Tax Impact Preview, which estimates (and helps you avoid) tax consequences of transactions.

21,966: The number of SmartDeposits we processed for our customers. SmartDeposit is a feature that securely monitors customers’ checking accounts for excess cash that could be invested.

176,500: The number of financial goals our customers created.

Our Assets Under Management Doubled in 2016

$3.3 billion: The amount of money we were managing for our customers on Jan. 1, 2016.

$6.7 billion: The amount of money we’re managing for our customers as of December 2016.

106%: Our growth in assets under management this last year.

128,040: The number of customers we started with in 2016.

200,000+: The number of customers we have as of December 2016.

61%: The jump in customer growth this year.

19,000: The number of IRAs we’ve helped our customers roll over.

312: The number of 401(k) plans that signed on with Betterment for Business.

And More Personally…

109: The number of team members we hired in 2016. (We’re hiring!)

32: The number of turkeys we served at Betterment Thanksgiving.

9: The number of babies who joined the Betterment family.

2017: You Ain’t Seen Nothing Yet

2016 was an amazing year. It’ll be hard to beat. But I’m confident that with the team we’ve assembled, we can do anything.

There’s so much more to do, more to build. We continue to improve every day: helping you make the most of your money with the goal of providing the highest net returns over time, personalizing our guidance toward smart decisions for you, providing human service and guidance that’s on your side, and becoming your central financial relationship.

My team and I are prepared to make 2017 Betterment’s best year yet, working tirelessly and efficiently for you. Happy holidays, and thank you for being a Betterment customer.

All data referenced in this article is estimated as of December 2016, unless otherwise noted.

1We’ve updated our pricing structure since this article was published. Learn more at betterment.com/pricing.

2We’ve updated our pricing structure since this article was published. Learn more at betterment.com/pricing.

3Data within “Global Market Review” was provided by third-party provider Xignite, with analysis by Betterment as of December 22, 2016.

4The total is $3,000 per year, regardless of whether you are married or single. Only exception is if you are married filing separately, in which case you can each use $1,500. https://www.irs.gov/taxtopics/tc409.html

5$68 million in losses through tax loss harvesting is based on an estimate, as of 12/20/16, of the gross amount of tax losses realized for customers by Betterment’s automated tax loss harvesting service since Jan. 1, 2016. Tax losses realized in taxable accounts can be applied to offset capital gains or ordinary income, thereby deferring tax until the investments are eventually sold. Tax deferral is expected to lower an investor’s overall tax burden because the amount that would otherwise be owed can be reinvested and compounded over the course of the deferral period. This is not tax advice. For more information on Betterment’s tax loss harvesting service, and full disclosures, please see: https://www.betterment.com/resources/research/tax-loss-harvesting-white-paper/

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