As investors enter a new year, they face a landscape shaped by tariffs, artificial intelligence, and economic uncertainties. For those with a Betterment portfolio, there is confidence in an investment approach that adapts to current trends. Each year, portfolio adjustments reflect the latest long-term forecasts, ensuring investments remain relevant and strategically sound.
These annual updates involve recalibrating the proportions of various asset classes and integrating new funds that enhance exposure or reduce costs.
The upcoming changes for 2026 will significantly influence your investment journey.
Table of Contents:
Core investment strategy revisions
Our commitment to passive investing remains strong, serving as the foundation of our portfolio approach. Passive investing tracks established indexes, appreciated for affordability and strong historical performance. However, it has limitations, particularly in fixed income.
Enhancements in bond fund management
Many passively-managed bond funds reflect only a limited market segment, often overlooking high-potential sectors like high-yield and securitized opportunities. To address this, we are introducing an actively-managed bond fund as a key component of our bond allocations.
The bond market is uniquely suited for active management, with potential for outperformance rooted in fund managers’ expertise. We employ rigorous quantitative and qualitative evaluations to assess these managers when incorporating such funds into our portfolios.
Adjustments to stock allocations
Similar to the previous year, slight modifications will be made to our allocation of U.S. stocks. This allocation is divided into three sub-asset classes, each defined by the current market valuations of the underlying companies.
Rebalancing stock exposure
We are reducing our allocation to mid-cap stocks, aligning it more closely with that of small-cap stocks, while increasing exposure to large-cap stocks. These adjustments reflect a more accurate representation of the relative sizes of each sub-asset class in the stock market.
In addition to these changes, we expect a modest increase in the risk levels of our portfolios, including all three of our Socially Responsible Investing portfolios, with a slight rise in exposure to short-term Treasuries. This strategy enhances the glide path for clients using our auto-adjust feature, while also reducing investment risks as target dates approach.
Innovations in cryptocurrency investments
The Betterment Crypto ETF portfolio—currently unavailable in Betterment 401(k)s—is set to increase its allocation to bitcoin, aligning it with its market capitalization weight. We are also making strategic shifts by incorporating lower-cost funds, decreasing the portfolio’s weighted average expense ratio by 0.10%. Our fund selection process is ongoing, as we continually seek opportunities to lower investment costs as new funds become available.
The implementation of this year’s adjustments will follow a gradual rollout over the coming weeks. Our technology is tailored to optimize tax efficiency for taxable accounts. It is important to note that tax-advantaged accounts, such as Betterment IRAs and Betterment 401(k)s, will not experience any tax implications from these updates.
These annual updates involve recalibrating the proportions of various asset classes and integrating new funds that enhance exposure or reduce costs. The upcoming changes for 2026 will significantly influence your investment journey.0
These annual updates involve recalibrating the proportions of various asset classes and integrating new funds that enhance exposure or reduce costs. The upcoming changes for 2026 will significantly influence your investment journey.1