2026 portfolio updates: What plan sponsors need to know
Updates to the Betterment managed strategies are coming soon.
Market volatility and lessons for the year ahead
From a new U.S. administration and rising geopolitical tensions to interest rate cuts and questions around AI, 2025 was a year that kept investors on alert. Meanwhile, the longest government shutdown in U.S. history added further uncertainty.
Despite the volatility and uncertainty, diversification proved its value once again. Staying diversified across asset classes helped portfolios remain resilient, one of the cornerstones of Betterment’s investment philosophy.
How diversification supported long-term performance
90% stocks/10% bonds tax-advantaged portfolio, annual net of fees returns as of September 30, 2025.
While no one can predict what 2026 will bring, we remain focused on our long-term, disciplined investment process. Our portfolios are built to weather short-term volatility and support steady progress toward employees’ retirement goals.
Betterment’s disciplined portfolio management process
As your 3(38) investment fiduciary, Betterment regularly reviews and updates our portfolio strategies to align with evolving market conditions. Each year, we refresh our assumptions for expected returns, volatilities, and correlations across asset classes. We also evaluate underlying funds for cost efficiency and diversification benefits.
Using these updated inputs, we simulate thousands of potential market paths to identify the optimal mix of assets that maximizes expected returns for a given level of risk. This rigorous process ensures our portfolios are designed for the long run, not short-term trends.
2026 portfolio updates for Betterment portfolios
For 2026, we’re implementing strategic updates across several Betterment-managed portfolios, including:
- Core
- Innovative Technology
- Value Tilt
- All Socially Responsible Investing (SRI) portfolios: Broad, Social, and Climate Impact
- Flexible portfolio
Expanding access to the bond market
We’re adding an actively managed core bond fund to our non-SRI strategies, broadening exposure across the global bond market. Passive strategies tend to focus on U.S. Treasuries, and overlook other parts of the bond market. As market conditions shift and interest rates decline, active management can open up more opportunities to access other bonds in the broader market, such as securitized products or high-yield bonds which may offer greater total return potential. This new option will also be available within the Flexible portfolio to give build-it-yourself investors greater customization.
Fine-tuning U.S. exposure
Within our U.S. stock allocations, we’re slightly reducing mid-cap exposure and reallocating toward large-cap stocks to better align with benchmarks while maintaining strong diversification.
Beyond these tweaks, some risk levels of our portfolios (including all three of our SRI portfolios) may see minor adjustments to our short-term bond allocations, where we’re slightly increasing exposure to short-term Treasuries. This helps smooth out the glide path for employees using our auto-adjust feature, de-risking them as they near retirement.
What these changes mean for your employees’ portfolios
Betterment’s technology makes these updates seamless. Automated rebalancing will transition employees’ portfolios to the new target allocations over time without the need to lift a finger.
It’s another example of how Betterment combines fiduciary oversight, disciplined portfolio management, and smart automation to make it easy to be invested.
Learn more about Betterment’s investment approach
If you’d like to learn more about our approach to investing, you might want to check out these articles:
You can always review our 401(k) investment options here.