As the finance sector evolves, investors face challenges such as tariffs, the rise of artificial intelligence, and disruptions from shutdowns. However, those with a portfolio designed by Betterment can remain confident in their investments. Each year, we reassess our strategies based on the latest long-term forecasts, ensuring your investments stay relevant and robust.
We are pleased to announce several key updates for our portfolios in 2026. These adjustments include changes in asset class allocations and the introduction of new funds that offer either reduced costs or enhanced market exposure.
Below, we outline what is in store for the upcoming investment year.
Table of Contents:
The importance of active management in bond portfolios
Our investment philosophy is rooted in passive investing, which involves monitoring specific indexes due to its cost-effectiveness and proven track record. However, this approach has limitations, particularly in the fixed-income sector.
Many passively managed bond funds represent only a fraction of the entire bond market. This underrepresentation can be detrimental, especially in sectors like high-yield bonds and securitized offerings that provide unique opportunities in fluctuating markets, particularly during interest rate declines. To capture these potential gains, we are introducing a new actively managed bond fund that will significantly enhance our portfolios’ bond allocations.
Choosing the right fund managers
In active management, the expertise of fund managers is crucial. We employ a rigorous quantitative and qualitative assessment method to evaluate fund managers, ensuring we align our portfolios with the most capable professionals in the industry.
Revising stock allocations for better alignment
In line with previous years, we are making slight modifications to our allocation of U.S. stocks, categorized into three sub-asset classes based on market valuations. This year, we will reduce our exposure to mid-cap stocks, aligning their allocation more closely with small-cap stocks, while increasing our stake in large-cap stocks. These adjustments aim to better reflect the relative weights of each sub-asset class within the broader stock market.
Enhancing risk management strategies
Additionally, some portfolios—particularly our Socially Responsible Investing options—will see a slight increase in their exposure to short-term Treasuries. This strategy aims to provide a smoother investment experience for clients using our auto-adjust feature and to mitigate risks as target dates approach.
Innovations in the Crypto ETF portfolio
For our Betterment Crypto ETF portfolio, which is not available through Betterment 401(k)s, we will increase our allocation to bitcoin to align with its market capitalization weight. We are also integrating lower-cost funds, effectively reducing the portfolio’s weighted average expense ratio by 0.10%. Our commitment to minimizing investment costs remains steadfast, and we continuously evaluate new funds as they become available.
As in the previous year, we will gradually implement these changes over the coming weeks. Our technology is designed to identify the most tax-efficient approach for taxable accounts, ensuring minimal disruption. For those with tax-advantaged accounts like Betterment IRAs or 401(k)s, these updates will not incur any tax implications.
To review the updated portfolio weights, please visit the relevant portfolio pages on our website. Clients can also view their revised holdings through the Betterment app with just a few taps. This functionality exemplifies our dedication to providing an effortless investment experience.
We are pleased to announce several key updates for our portfolios in 2026. These adjustments include changes in asset class allocations and the introduction of new funds that offer either reduced costs or enhanced market exposure. Below, we outline what is in store for the upcoming investment year.0