The investment landscape is evolving, influenced by economic policies, technological advancements, and global market fluctuations. Investors utilizing Betterment’s portfolio management can remain assured that their investments are aligned with current trends. Each year, Betterment updates portfolios to reflect the most accurate long-term forecasts.
This year’s adjustments include realigning asset class proportions and introducing new funds that promise lower costs and improved market exposure. Here is a detailed look at the upcoming changes for your investments.
Table of Contents:
Revamping the bond investment approach
Passive investing has long been a cornerstone of portfolio development due to its cost-effectiveness and proven performance. However, it has drawbacks, particularly in fixed income investments. Traditional passive bond funds often cover only a fraction of the entire market. This limitation can result in sectors like high-yield and securitized bonds being overlooked, despite their potential for better returns during declining interest rates.
Introducing actively managed bond funds
To capitalize on these untapped opportunities, Betterment is integrating a new actively managed bond fund into several portfolios. This strategic move allows for a more flexible approach to navigate the complexities of the bond market more effectively. The success of this strategy depends largely on the expertise of fund managers, which is why Betterment applies rigorous quantitative and qualitative assessments to evaluate their capabilities.
Stock allocation adjustments
In line with its commitment to optimizing investment strategies, Betterment is making slight modifications to its allocation of U.S. stocks. This allocation is segmented into three subcategories based on the market valuations of the underlying companies.
This year, Betterment is reducing its investment in mid-cap stocks to align their representation with that of small-cap stocks while increasing its stake in large-cap stocks. This adjustment enhances overall diversification and aligns portfolios with market benchmarks.
Enhancing risk management
Additionally, Betterment is slightly increasing exposure to short-term Treasuries in certain portfolios, including all Socially Responsible Investing (SRI) options. This enhancement aims to stabilize the investment journey for clients benefiting from the auto-adjust feature, especially as they approach their target dates.
Adjustments in the cryptocurrency portfolio
In the realm of cryptocurrency, Betterment is revising its Crypto ETF portfolio, which is not included in Betterment 401(k)s. This year, the allocation to bitcoin will be increased to better reflect its market capitalization. Furthermore, Betterment will substitute in lower-cost funds, reducing the portfolio’s weighted average expense ratio by 0.10%. The approach continues to minimize investment expenses as new funds become available.
As these updates are implemented, Betterment’s technology aims to ensure the most tax-efficient transition, particularly for taxable accounts. For tax-advantaged accounts, such as Betterment IRAs and 401(k)s, clients will not experience any tax repercussions from these changes.
How to access updated portfolios
Clients eager to discover the latest portfolio weights can visit the relevant sections on Betterment’s website. They can also easily view their updated holdings through the Betterment app. This seamless integration exemplifies Betterment’s commitment to making investment management user-friendly.
This year’s adjustments include realigning asset class proportions and introducing new funds that promise lower costs and improved market exposure. Here is a detailed look at the upcoming changes for your investments.0