Robo Advisor Betterment Portfolios Are Robots Better?

robo-advisors-Betterment-portfolios

Robo Advisor Betterment Portfolios can be built with 3-6 ETFs. They are exposed to between 40% and 100% equities. They have low-risk portfolios and high-risk portfolios. They use DFA funds.

For the past 10 years, the Robo Advisor Betterment 100 has returned 9.73% with a standard deviation of 17.68%. The dividend yield is 2.44. The 30-year return is 9.45%. Year to date the Robo Advisor Betterment 100 portfolio has returned -1.18%.  

What is the performance of the Betterment portfolios?

Here you can see the performance of the Betterment portfolios. They have been benchmarked using our own time-series of assets.

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Robo Advisor Betterment 1006-1.1825.669.73%9.4530.07%
Robo Advisor Betterment 8010-0.0422.098.59%9.0130.08%
Robo Advisor Betterment 60101.118.577.43%8.4320.08%
Robo Advisor Betterment 40112.0514.756.08%7.6210.09%
Robo Advisor Betterment 9011-0.6623.979.19%9.2930.08%
Robo Advisor Betterment 70100.3820.678.15%8.9220.08%
Robo Advisor Betterment 50101.3417.467.12%8.4720.09%
Robo Advisor Betterment 30121.9312.595.18%7.1910.08%
Robo Advisor Betterment 20122.139.723.96%6.310.07%
Robo Advisor Betterment 10122.376.832.71%5.3710.06%
Robo Advisor Betterment 022.533.981.47%4.410.05%
Robo Advisor Betterment 2020 Taxable 100% Stocks6-3.4624.418.83%8.5730.07%
Robo Advisor Betterment 2020 Taxable 90% Stocks10-2.6523.038.54%8.4730.07%
Robo Advisor Betterment 2020 Taxable 80% Stocks10-1.921.688.23%8.3630.08%
Robo Advisor Betterment 2020 Taxable 70% Stocks10-1.0420.247.86%8.1920.08%
Robo Advisor Betterment 2020 Taxable 60% Stocks10-0.1718.887.54%8.1120.08%
Robo Advisor Betterment 2020 Taxable 50% Stocks110.6917.397.11%7.9420.08%
Robo Advisor Betterment 2020 Taxable 40% Stocks121.5115.86.59%7.710.08%
Robo Advisor Betterment 2020 Taxable 30% Stocks121.9813.45.62%7.1510.08%
Robo Advisor Betterment 2020 Taxable 20% Stocks122.4110.864.53%6.4910.07%
Robo Advisor Betterment 2020 Taxable 10% Stocks122.78.043.30%5.6910.06%
Robo Advisor Betterment 2020 Taxable 0% Stocks12.153.511.14%4.2110.05%
Robo Advisor Betterment 2020 Retirement 100% Stocks6-3.0924.648.87%8.5230.07%
Robo Advisor Betterment 2020 Retirement 90% Stocks10-2.8322.888.53%8.4230.07%
Robo Advisor Betterment 2020 Retirement 80% Stocks10-2.2721.378.21%8.2630.08%
Robo Advisor Betterment 2020 Retirement 70% Stocks10-1.6219.767.83%8.0420.08%
Robo Advisor Betterment 2020 Retirement 60% Stocks10-0.9618.237.49%7.920.08%
Robo Advisor Betterment 2020 Retirement 50% Stocks11-0.2716.67.05%7.6920.08%
Robo Advisor Betterment 2020 Retirement 40% Stocks120.4114.926.51%7.4210.08%
Robo Advisor Betterment 2020 Retirement 30% Stocks120.9712.65.55%6.8910.07%
Robo Advisor Betterment 2020 Retirement 20% Stocks121.5310.174.47%6.2710.07%
Robo Advisor Betterment 2020 Retirement 10% Stocks122.027.513.25%5.5210.06%
Robo Advisor Betterment 2020 Retirement 0% Stocks12.153.511.14%4.2110.05%

How do you build the Betterment portfolios with ETFs?

This is for Robo Advisor Betterment 100. You can find more further below.

  • 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)

What is Robo Advisor Betterment?

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. They are some of the few portfolios 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. It 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 original 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.

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)

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

Resources for Betterment portfolios

Betterment YouTube channel – it is 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 their marketing speak.

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

2001: A Space Odyssey on IMDB

Related questions

Can you lose money with Betterment?

No. The Betterment portfolios are diversified holding many kinds of stocks and bonds. You can only lose money if you sell your stocks in your Betterment account when the stock market is experiencing a downturn. 

Is Betterment good for investing?

Yes. Betterment is a fantastic way to save and invest because it is all done automaticly. Betterment also has very good portfolios, but not the best-performing.

Is Betterment better than Vanguard?

Betterment and Vanguard do two different things. Vanguard is for the do-it-yourself investor who has a little knowledge about investing. Betterment is for anyone who want to get started with investing without getting into the details of investing.

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