Portfolios

2025 portfolio updates: What plan sponsors need to know Small updates to Core, Value Tilt, SRI, and Innovative Tech are coming soon. As part of Betterment’s investment oversight serving as your 3(38) investment fiduciary, our Investing team regularly reviews and updates our portfolio strategies to align with changing market conditions. As a fiduciary, Betterment is required to act in your employees’ best interests. We do this in part by regularly adjusting our portfolios' asset allocations, or the specific weights of asset classes (i.e., stocks and bonds) and subasset classes (large- cap stocks, long-term bonds, etc.). For 2025, we are implementing strategic adjustments across multiple portfolios that are guided by updated capital market assumptions and asset class expectations. Let’s quickly walk through our approach to portfolio management, and then we’ll preview the changes coming in the weeks ahead. How we evaluate and manage our portfolios Betterment runs a rigorous, quantitative process to formulate long-term expectations for both the returns and risk levels of various asset classes. Our aim is to maximize your expected return relative to risk, so that you’re compensated appropriately for the level of risk you take with your investing. From there, we simulate thousands of paths for the market, and average the optimal asset allocations for each to build more robust portfolio weights. This “Monte Carlo” technique is ideal for the areas of life where random variables are everywhere, areas like capital markets. It’s important to reiterate that things like interest rate shifts and federal fiscal policy can drive short-term market volatility in the months and year ahead, our portfolios are managed with a long-term outlook. We don’t chase trends, but rather we focus on helping your employees reach their investment goals. 2025 updates This year's portfolio updates, while much smaller in scope and scale than last year's, are no less important. Let’s take a closer look: Core Value Tilt All three SRI portfolios Innovative Technology Here's what's changing: More U.S. exposure While we don't advise going all-in on American markets, the forecasted risk-adjusted return for the U.S. remains strong in the long run (think: decades) relative to international markets. So similar to last year’s portfolio updates, we’re dialing down the international exposure for most portfolios. Those portfolios will see: Small increases in U.S. stock and bond allocations Small decreases in international emerging market stocks and bonds Small decreases in international developed market bonds More short-term corporate bonds The biggest change this year will be felt by portfolios with larger bond allocations. We expect U.S. short-term, high-grade corporate bonds to offer higher yields without undue increases in long-term risk, so we’re increasing the exposure to them while decreasing the weight of short-term U.S. Treasuries. The yields on these types of treasury bonds, which mature in a year or less, tend to fall right along with interest rates, and a lower interest rate environment is still expected in the long run. New innovation ETF Separately, we’re diversifying the Innovative Technology portfolio by adding a new actively-managed fund. This new ETF builds on themes like AI and biotech while adding more exposure to large-cap stocks and the Information Technology sector (hardware, software, etc.) as a whole. What this means for your employees The great thing about technology like ours is that it makes implementing updated portfolios simple. Our automated rebalancing will tax-efficiently transition employees’ portfolios to the new target weights over time. It’s yet another example of how we make it easy to be invested. Additional resources If you’d like to learn more about our approach to investing, you might want to check out these articles: Portfolio Construction Process: Core, Value, Innovative Technology ETF Selection Methodology SRI Methodology Innovative Technology Article and disclosures You can always review our 401(k) investment options here.