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Video: What Is Betterment Doing For Me?

We shed light on the steps we’re taking in these times of market volatility—and the steps we always take—to help do what’s best for your money.

Articles by Dan Egan
By Dan Egan Managing Director of Behavioral Finance & Investing, Betterment Published May. 06, 2020
Published May. 06, 2020
5 min read

If you’re looking for more guidance, we’ve got you covered with our guide to stock market volatility.

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Transcript

“Hey everybody. Dan Egan from the Advice and Investing Team here at Betterment. One of the most common questions we get during times of volatility is: what is Betterment doing? What are you doing?

We’re going to start off by what we’re not doing. We are not making any impulsive decisions. We are not panicking. We are not changing our principles, and we are not going against the evidence of what works during times like these. We’re not reacting to what markets are doing, and we are not changing our advice or target allocations.

The tough thing is that investing is about tomorrow’s returns, and the returns over the next months and years—not yesterday’s returns. If I knew what tomorrow’s returns would be, we would definitely act upon them. But I have to admit that I don’t. A lot of us don’t know what’s going to happen over the next few days.

Much like swerving after you hit a pothole is more dangerous than trying to stay straight, attempting to react to markets after they’ve already fallen is more dangerous than trying to stay the course. And we’ve already seen this, during this down market. Some of the biggest “up” days, last Friday was a positive 10% return, have come after the biggest “down” days.

If we sold out right after a loss, we’d simply be locking it in, and removing the potential for recovery. So, we’re not going to do that. We do not tactically change our allocations.

All that said, it’s not as if we are just sitting here. We are actually doing things. First of all, we are doing exactly what you signed up for. We are rebalancing, which means selling whatever’s overweight in your portfolio, which generally means it’s done relatively well recently, and buying whatever has underperformed.

We tend to rebalance a lot more in choppy markets, when those assets go out of sync. So, you can look forward to a lot more rebalancing in the next few months.

Next up, tax loss harvesting in taxable accounts, for clients that have it activated. This is one of the few really bright spots in markets such as these. You’re going to reduce our tax burden this year, and maybe 20 or 30 years in the future you’ll have a slightly higher tax burden. In another video, you can check out in this series—and please do take a look at it—I talk about how to set your account up to get the most out of tax loss harvesting.

Next up is our Cash Reserve account. We’re still actively looking out for the best interest rates we can find available, it’s still FDIC insured, and it’s still posting some of the best yields available in the market today. So check it out.

Lastly, we’re still being human. We’re still answering emails and phone calls. The head of our CFPteam has actually lost his voice because he’s been on so many calls recently. I’m answering your questions through videos like this. I’m also on social media—you can find me on Twitter @dan_betterment and I’m happy to chat with you and answer questions there.

I really urge you to try to use emails to contact us. We can answer questions more efficiently and effectively, and we can deep-link you to places inside of the app, which is a lot harder over the phone. We can also serve more clients concurrently that way.

If your question isn’t urgent, if it’s something that can wait a few months, please delay it. We’ve got a lot of urgent inquires going on right now.

Lastly, and this is a little bit behind the scenes—we are paying very close attention to what’s going on in markets. Both in terms of the bid-ask spread and the volatility in trading. So far, we’ve done a pretty good job we think about making sure our clients do not pay large bid-ask spreads in places where they shouldn’t.

Our trading teams have been working around the clock to monitor and make sure that the algorithms are behaving themselves.

I wish I could tell you that I have a crystal ball and I know what’s going to happen in the next few months. I don’t. Absent that, we are actively doing everything that we have high confidence is going to help lead to success, and help you come out of the other side of this.

If you have any questions, please feel free to get in touch. Take care.”


Betterment Cash Reserve

†Betterment Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC may participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance. Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities through Betterment LLC and Betterment Securities. Cash Reserve should not be viewed as a long-term investment option.

Funds held in your brokerage accounts are not FDIC‐insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC‐insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details. Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 (or $2,000,000.00 for joint accounts) of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 for each insurable capacity—e.g., individual or joint—at up to four Program Banks). Even if there are more than four Program Banks, clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000.00 (or $2,000,000.00 for joint accounts). The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured. For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.

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