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Robo Advisor Betterment Portfolios Are Robots Better?

robo-advisors-Betterment-portfolios

This is the article displaying the portfolios by the robot advisor Betterment. Here you will find a description, performance for the portfolios as well as detailed information on how to implement it yourself.

Robo Advisor Betterment Portfolios Are Robots Better?

Betterment is probably the most well-known fintech company. It started the robo-advisor phenomenon. If you ever listened to NPR Radio or podcasts you probably know who they are.

Betterment has 16 Billion assets under management as per 2019. Their portfolios are well diversified and are some of the few that have emerging market bonds as an asset class. If you want to gain a greater insight into the robo-advisory phenomenon I recommend picking up FinTech Innovation: From Robo-Advisors to Goal-Based Investing and Gamification.

Their biggest competitor is Wealthfront.

To see a comparison of robo advisor portfolios see our article Robo Advisor Performance. This is the article where we compare the performance of various robo advisors.

This mission is too important for me to allow you to jeopardize it.
– HAL 9000

Description of the Betterment portfolios

There seems to be a trend in the robo advisor portfolios. They are all highly diversified. That means they use asset classes not usually seen as much in other portfolios.

The Betterments portfolios include the use of emerging market bonds and many value stocks for example mid-cap value.

This creates a set up for potential outperformance in that they can rebalance their way to higher returns.

In circa 2014 (or maybe 2012) they changed their portfolio composition. The asset allocation that you see below is a reflection of that asset allocation. Their new asset allocation (which is not that new is also benchmarked but we still need to document it here. That is upcoming.

Two sets of portfolios

In the 2020 portfolios, there are two sets of portfolios.

  1. The first set is the portfolios the one with taxable in their name. They are meant to be used in a taxable account. They contain asset classes that minimize taxes such as muni bonds.
  2. The second set is the portfolios with retirement in their name. They are meant to be used in a tax-sheltered/tax-deferred account. They contain asset classes that are not particularly tax-aware such as standard bonds fx. total bonds market, REITs, etc.

Let’s see how they perform.

Performance of the Betterment portfolios

Portfolio nameAsset class count1 year return (2019)Year to date10 year returnCAGR since 1989DrawdownRisk LevelExpense ratioYield
Robo Advisor Betterment 100625.66%0.74%9.73%9.45%-40.07%5 - very high risk0.08%2.42%
Robo Advisor Betterment 801022.09%0.80%8.59%9.01%-31.32%4 - high risk0.08%2.29%
Robo Advisor Betterment 601018.57%0.88%7.43%8.43%-22.52%3 - medium risk0.09%2.15%
Robo Advisor Betterment 401114.75%0.91%6.08%7.62%-13.47%2 - low risk0.10%2.02%
Robo Advisor Betterment 901123.97%0.76%9.19%9.29%-36.12%5 - very high risk0.08%2.36%
Robo Advisor Betterment 701020.67%0.84%8.15%8.92%-28.06%4 - high risk0.09%2.21%
Robo Advisor Betterment 501017.46%0.92%7.12%8.47%-20.24%2 - low risk0.10%2.09%
Robo Advisor Betterment 301212.59%0.78%5.18%7.19%-10.91%1 - very low risk0.09%1.92%
Robo Advisor Betterment 20129.72%0.65%3.96%6.30%-5.81%1 - very low risk0.07%1.81%
Robo Advisor Betterment 10126.83%0.52%2.71%5.37%-0.72%1 - very low risk0.06%1.70%
Robo Advisor Betterment 023.98%0.39%1.47%4.40%0.00%1 - very low risk0.05%1.60%
Robo Advisor Betterment 2020 Taxable 100% Stocks624.41%0.28%8.83%8.57%-40.33%n/a0.07%2.63%
Robo Advisor Betterment 2020 Taxable 90% Stocks1023.03%0.44%8.54%8.47%-36.09%n/a0.08%2.56%
Robo Advisor Betterment 2020 Taxable 80% Stocks1021.68%0.58%8.23%8.36%-31.95%n/a0.08%2.49%
Robo Advisor Betterment 2020 Taxable 70% Stocks1020.24%0.73%7.86%8.19%-27.68%n/a0.08%2.42%
Robo Advisor Betterment 2020 Taxable 60% Stocks1018.88%0.87%7.54%8.11%-23.54%n/a0.09%2.34%
Robo Advisor Betterment 2020 Taxable 50% Stocks1117.39%0.96%7.11%7.94%-19.39%n/a0.09%2.22%
Robo Advisor Betterment 2020 Taxable 40% Stocks1215.80%1.01%6.59%7.70%-15.35%n/a0.09%2.07%
Robo Advisor Betterment 2020 Taxable 30% Stocks1213.40%0.92%5.62%7.15%-10.53%n/a0.08%1.89%
Robo Advisor Betterment 2020 Taxable 20% Stocks1210.86%0.82%4.53%6.49%-5.62%n/a0.07%1.73%
Robo Advisor Betterment 2020 Taxable 10% Stocks128.04%0.68%3.30%5.69%-1.43%n/a0.07%1.58%
Robo Advisor Betterment 2020 Taxable 0% Stocks13.51%0.31%1.14%4.21%0.00%n/a0.05%1.49%
Robo Advisor Betterment 2020 Retirement 100% Stocks624.64%0.40%8.87%8.52%-40.53%n/a0.07%2.62%
Robo Advisor Betterment 2020 Retirement 90% Stocks1022.88%0.44%8.53%8.42%-36.24%n/a0.08%2.54%
Robo Advisor Betterment 2020 Retirement 80% Stocks1021.37%0.58%8.21%8.26%-32.27%n/a0.08%2.45%
Robo Advisor Betterment 2020 Retirement 70% Stocks1019.76%0.72%7.83%8.04%-28.17%n/a0.08%2.35%
Robo Advisor Betterment 2020 Retirement 60% Stocks1018.23%0.85%7.49%7.90%-24.22%n/a0.09%2.24%
Robo Advisor Betterment 2020 Retirement 50% Stocks1116.60%0.94%7.05%7.69%-20.24%n/a0.09%2.10%
Robo Advisor Betterment 2020 Retirement 40% Stocks1214.92%0.99%6.51%7.42%-16.30%n/a0.09%1.93%
Robo Advisor Betterment 2020 Retirement 30% Stocks1212.60%0.91%5.55%6.89%-11.42%n/a0.08%1.76%
Robo Advisor Betterment 2020 Retirement 20% Stocks1210.17%0.81%4.47%6.27%-6.38%n/a0.08%1.61%
Robo Advisor Betterment 2020 Retirement 10% Stocks127.51%0.67%3.25%5.52%-1.21%n/a0.07%1.49%
Robo Advisor Betterment 2020 Retirement 0% Stocks13.51%0.31%1.14%4.21%0.00%n/a0.05%1.49%

The 0% drawdown of the 0% stocks is not an error. These portfolios have not had a down year for 30 years.

Asset Allocation of the Betterment portfolios

Robo advisor Betterment 100                     

  • 34.60%  US Total Stock Market   (VTI)
  • 9.20%    US Large Cap Value         (VTV)
  • 7.50%    US Mid Cap Value            (JKI)
  • 6.40%    US Small Cap Value         (VIOV)
  • 27.30%  International Developed Blend      (VEA)
  • 15.00%  Emerging Markets           (VWO)

Robo Advisor Betterment 90                     

  • 30.90%  US Total Stock Market   (VTI)
  • 8.20%    US Large Cap Value         (VTV)
  • 6.70%    US Mid Cap Value            (JKI)
  • 5.70%    US Small Cap Value         (VIOV)
  • 24.60%  Int. Developed Blend      (VEA)
  • 14.00%  Emerging Markets           (VWO)
  • 3.50%    Total US Bond Market    (BND)
  • 0.60%    Cash (money market fund)          (BIL)
  • 1.20%    TIPS       (VTIP)
  • 2.90%    Non-US Bonds   (BNDX)
  • 1.70%    Emerging Market Bonds (VWOB)

Robo advisor Betterment 80                       

  • 27.00%  US Total Stock Market   (VTI)
  • 7.20%    US Large Cap Value         (VTV)
  • 5.90%    US Mid Cap Value            (JKI)
  • 5.00%    US Small Cap Value         (VIOV)
  • 22.10%  International Developed Blend      (VEA)
  • 12.80%  Emerging Markets           (VWO)
  • 6.80%    Total US Bond Market    (BND)
  • 2.40%    TIPS       (VTIP)
  • 7.20%    Non-US Bonds   (BNDX)
  • 3.60%    Emerging Market Bonds (EMB / VWOB)

Robo Advisor Betterment 70                     

  • 23.40%  US Total Stock Market   (VTI)
  • 6.30%    US Large Cap Value         (VTV)
  • 5.10%    US Mid Cap Value            (JKI)
  • 4.30%    US Small Cap Value         (VIOV)
  • 19.30%  Int. Developed Blend      (VEA)
  • 11.60%  Emerging Markets           (VWO)
  • 9.80%    Total US Bond Market    (BND)
  • 3.80%    TIPS       (VTIP)
  • 10.90%  Non-US Bonds   (BNDX)
  • 5.50%    Emerging Market Bonds (VWOB)

Robo advisor Betterment 60                       

  • 19.80%  US Total Stock Market   (VTI)
  • 5.30%    US Large Cap Value         (VTV)
  • 4.30%    US Mid Cap Value            (JKI)
  • 3.60%    US Small Cap Value         (VIOV)
  • 16.70%  International Developed Blend      (VEA)
  • 10.30%  Emerging Markets           (VWO)
  • 12.30%  Total US Bond Market    (BND)
  • 5.00%    TIPS       (VTIP)
  • 14.70%  Non-US Bonds   (BNDX)
  • 8.00%    Emerging Market Bonds (EMB / VWOB)

Robo Advisor Betterment 50                     

  • 16.20%  US Total Stock Market   (VTI)
  • 4.40%    US Large Cap Value         (VTV)
  • 3.60%    US Mid Cap Value            (JKI)
  • 3.00%    US Small Cap Value         (VIOV)
  • 13.70%  Int. Developed Blend      (VEA)
  • 9.00%    Emerging Markets           (VWO)
  • 14.70%  Total US Bond Market    (BND)
  • 6.30%    TIPS       (VTIP)
  • 18.40%  Non-US Bonds   (BNDX)
  • 10.70%  Emerging Market Bonds (VWOB)

Robo advisor Betterment 40                       

  • 12.90%  US Total Stock Market   (VTI)
  • 3.40%    US Large Cap Value         (VTV)
  • 2.80%    US Mid Cap Value            (JKI)
  • 2.40%    US Small Cap Value         (VIOV)
  • 11.10%  International Developed Blend      (VEA)
  • 7.40%    Emerging Markets           (VWO)
  • 7.00%    Short Term Treasuries       (VGSH)
  • 15.10%  Total US Bond Market    (BND)
  • 6.60%    TIPS       (VTIP)
  • 19.50%  Non-US Bonds   (BNDX)
  • 11.80%  Emerging Market Bonds (EMB / VWOB)

Robo Advisor Betterment 30                     

  • 9.50%    US Total Stock Market   (VTI)
  • 2.60%    US Large Cap Value         (VTV)
  • 2.10%    US Mid Cap Value            (JKI)
  • 1.80%    US Small Cap Value         (VIOV)
  • 8.30%    Int. Developed Blend      (VEA)
  • 5.60%    Emerging Markets           (VWO)
  • 24.20%  Short Term Treasury       (VGSH)
  • 11.40%  Total US Bond Market    (BND)
  • 6.10%    Short-Term Investment-Grade   (VCSH)
  • 5.00%    TIPS       (VTIP)
  • 14.60%  Non-US Bonds   (BNDX)
  • 8.80%    Emerging Market Bonds (VWOB)

Robo Advisor Betterment 20                     

  • 6.30%    US Total Stock Market   (VTI)
  • 1.70%    US Large Cap Value         (VTV)
  • 1.40%    US Mid Cap Value            (JKI)
  • 1.20%    US Small Cap Value         (VIOV)
  • 5.60%    Int. Developed Blend      (VEA)
  • 3.70%    Emerging Markets           (VWO)
  • 42.80%  Short Term Treasury       (VGSH)
  • 7.60%    Total US Bond Market    (BND)
  • 10.70%  Short-Term Investment-Grade   (VCSH)
  • 3.30%    TIPS       (VTIP)
  • 9.80%    Non-US Bonds   (BNDX)
  • 5.90%    Emerging Market Bonds (VWOB)

Robo Advisor Betterment 10                     

  • 3.20%    US Total Stock Market   (VTI)
  • 0.90%    US Large Cap Value         (VTV)
  • 0.50%    US Mid Cap Value            (JKI)
  • 0.60%    US Small Cap Value         (VIOV)
  • 2.80%    Int. Developed Blend      (VEA)
  • 1.90%    Emerging Markets           (VWO)
  • 61.40%  Short Term Treasury       (VGSH)
  • 3.80%    Total US Bond Market    (BND)
  • 15.40%  Short-Term Investment-Grade   (VCSH)
  • 1.70%    TIPS       (VTIP)
  • 4.90%    Non-US Bonds   (BNDX)
  • 2.90%    Emerging Market Bonds (VWOB)

Robo Advisor Betterment 0 = 100% Bonds                          

  • 80.00%  Short Term Treasury       (VGSH)
  • 20.00%  Short-Term Investment-Grade   (VCSH)

Check the best mutual funds and ETFs here.

Resources for Betterment portfolios

Betterment youtube channel – more about them than you.

Betterment website – they do have a lot of info on how they construct their portfolio and about investing in general. Beware of marketing speak.

Betterment recently launched a podcast. Find it in your favorite podcast library.

2001: A Space Odyssey on IMDB

Conclusion

Are you attracted to robo advisors?

What do you think of the Betterment portfolio?

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