Financial Blogger Felix Salmon expresses a great wish in his post In Search of an Everything Bagel—that one fund could replicate the returns of the global economy. Such a fund would give investors the hope of capturing the global rate of GDP growth – and being so diverse would reduce the risk of investing in any one sector or country.
It’s the old idea of a “market portfolio,” a conceptually ideal investment, and one that Betterment seeks to reflect while retaining efficiency and access to your money.
Betterment’s stock market basket is not far off from the everything bagel. It is all US stocks, but US companies’ investments abroad mean that a US stock market index gives investors global exposure. And investing only in larger, more liquid US ETFs means that management fees and transaction costs are lower, which makes investing in Betterment a great way to capture the growth of the global economy.