TABLE OF CONTENTS
- What is a Flexible Portfolio?
- Who might it be appropriate for?
- What level of control does it offer?
- How do I set up or adjust my Flexible Portfolio?
- Which portfolio strategies can be adjusted with Flexible Portfolios?
- Can Betterment help me construct my Flexible Portfolio?
- If I use Flexible Portfolio, could my performance change?
- Will my use of a Flexible Portfolio impact the advice I receive from Betterment?
- How can it affect my taxes?
- Will using it impact my tax-savings features?
- How does it work with a Retirement Goal and Tax Coordination?
- How will using it impact my fees?
- Why is a 100% bond portfolio deemed to have diversification when it only has one asset class?
What is a Flexible Portfolio?
A Flexible Portfolio gives you more control over your investments, and allows you to modify the individual asset class weights in the Betterment portfolio strategy to best fit your preferences. We’ll provide a risk and diversification assessment of your changes.
Learn more about when using a Flexible Portfolio might make sense.
Who might it be appropriate for?
As always, Betterment provides customers with a recommended portfolio that is personalized to your goal. However, there may be specific, reasonable scenarios where making adjustments to our recommended portfolio makes sense.
What level of control does it offer?
A Flexible Portfolio is constructed from the same individual asset classes (and thus ETFs) included in the Betterment Portfolio Strategy. While you can adjust any of the recommended individual asset class weights to your liking, you cannot choose specific ETFs.
How do I set up or adjust my Flexible Portfolio?
You can adjust your existing portfolio strategy by first selecting a goal from the menu. Once you reach your goal’s Overview, navigate to Holdings, and click the “Edit” button below “Portfolio Strategy.”
If you are creating a new goal, you will be given the option to view “Other portfolio strategies” on the Recommended Portfolio Strategy page as part of the goal creation process.
Which portfolio strategies can be adjusted with Flexible Portfolios?
You can adjust the asset class weightings in the Betterment portfolio strategy. At this time, you cannot adjust the asset class weightings in our other portfolio strategies: Betterment SRI, Goldman Sachs Smart Beta, and BlackRock Target Income.
Can Betterment help me construct my Flexible Portfolio?
For customers on Betterment’s Digital plan: As always, Betterment provides customers with a recommended portfolio. However, sometimes customers have investing preferences that differ from our advice. Flexible Portfolios provide these customers with additional flexibility to express their preferences. However, we’re unable to provide specific advice on alterations to our recommended core portfolio strategy.
For customers on Betterment’s Premium plan: As part of your Premium plan, you can set up a call with one of our CFP® professionals for guidance. Aside from rare circumstances, we generally suggest following Betterment’s recommended portfolio.
If I use Flexible Portfolio, could my performance change?
Adjusting an investment portfolio requires careful consideration and experience. The allocation you choose is your responsibility, and your performance may be better or worse than the performance of one of Betterment’s own portfolio strategies with a comparable level of risk.
Additionally, although Tax Loss Harvesting+ and Tax Coordination will still work, altering or removing asset classes may impact the effectiveness of these strategies relative to their effectiveness when used with the Betterment Portfolio Strategy.
Will my use of a Flexible Portfolio impact the advice I receive from Betterment?
You still have access to the core of Betterment’s advice if you use Flexible Portfolios. We will still provide recommendations about the level of risk you should take in your portfolio, as well as how much to save in order to reach your goal. Review the Advice Tab in your Betterment account to see our advice.
While adjusting your portfolio, you will also receive a risk and diversification assessment of your changes. Please note that Betterment will not automatically adjust a Flexible Portfolio’s allocation as you approach the end of your goal term, as we generally do for goals following our recommended allocation that have our auto-adjust feature enabled.
How can it affect my taxes?
If you change an existing taxable goal’s portfolio to a Flexible Portfolio you may see an impact on your taxes. Betterment’s Tax Impact Preview will display the estimated impact.
Will using it impact my tax-savings features?
Flexible Portfolios are compatible with our tax-smart features, such as Tax Loss Harvesting+, Tax Coordination, and Tax Impact Preview, but altering or removing individual asset classes may impact the effectiveness of these strategies relative to their effectiveness when used with the Betterment Portfolio Strategy.
How does it work with a Retirement Goal and Tax Coordination?
Tax Coordination still works with Flexible Portfolios. If you elect a Flexible Portfolio for your Retirement Goal, all Betterment investment accounts within your Retirement Goal will share the same Flexible Portfolio, with individual asset classes distributed using our asset location strategies. However, altering or removing asset classes may impact the effectiveness of Tax Coordination relative to its effectiveness when used with the Betterment Portfolio Strategy.
How will using it impact my fees?
The standard Betterment management fee doesn’t change based on whether or not customers use Flexible Portfolios. The fund expenses for a Flexible Portfolio depend on your choice of individual asset class weights.
Why is a 100% bond portfolio deemed to have diversification when it only has one asset class?
The diversification rating tells you how much extra risk a custom portfolio is taking compared to a comparable optimized portfolio. A 100% short-term bond portfolio has an extremely low level of risk and is the optimal portfolio at that low level of risk. Because 100% short-term bonds provides optimal return at that risk level, it is given a good diversification rating.
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