New Betterment Portfolio Strategies

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
bzargarcia
Posts: 70
Joined: Sat Jul 07, 2007 10:40 am
Location: San Antonio, Texas

New Betterment Portfolio Strategies

Post by bzargarcia » Wed Sep 13, 2017 6:17 pm

A few weeks ago Betterment starting offering their Socially Responsible Investing strategies. Looks like today they are adding two more strategies.

BlackRock Target Income
https://www.betterment.com/resources/in ... -strategy/

Goldman Sachs Smart Beta
https://www.betterment.com/resources/in ... -strategy/

I didn't find an example of these new portfolios, but for those that enjoy reading about Smart Beta, the article has some good info.

Bart
Bart Garcia

User avatar
Vegomatic
Posts: 214
Joined: Tue Feb 27, 2007 11:16 pm

Re: New Betterment Portfolio Strategies

Post by Vegomatic » Wed Sep 13, 2017 9:03 pm

Bart: Thanks.

nervouscorps
Posts: 26
Joined: Sun Jan 05, 2014 8:01 pm

Re: New Betterment Portfolio Strategies

Post by nervouscorps » Thu Sep 14, 2017 11:43 am

Not a big fan of Smart Beta but I definitely like the Blackrock Income account. May be good if you were in retirement or on the other hand if you wanted to stash away some safer $ in a pure bond situation for a very conservative allocation.

User avatar
sunnywindy
Posts: 269
Joined: Sat Jan 18, 2014 4:42 pm
Location: Wilmington, NC

Re: New Betterment Portfolio Strategies

Post by sunnywindy » Thu Sep 14, 2017 2:03 pm

It all seems weird. I thought ROBO accounts existed to make investment decisions for you.
Powered by chocolate!

baenregod
Posts: 3
Joined: Thu Jun 16, 2016 4:04 pm

Re: New Betterment Portfolio Strategies

Post by baenregod » Thu Sep 14, 2017 6:36 pm

Curious to hear people's opinions of the smart beta portfolio. For a 100/0 portfolio it has the following:

3.9% SCZ (developed markets small cap) 0.40%
25.3% GSIE (developed markets beta) 0.25%
21.1% GEM (emerging markets) 0.50%
2.5% VNQ (REIT) 0.12%
41.3% GSLC (US large cap beta) 0.09%
5.9% VB (US small cap) 0.06%
Overall ER 0.23%


Compared to the 100/0 Betterment portolio:

17.7% VTI (US total stock market) 0.04%
17.6% VTV (US large cap value) 0.06%
5.6% VOE (US mid cap value) 0.07%
4.9% VBR (US small cap value) 0.07%
41.0% VEA (developed markets) 0.07%
13.3% VWO (emerging markets) 0.14%
Overall ER 0.07%

So it appears the overall ER is 0.16% more. Is there a decent chance the "smart beta" outperforms the default betterment value tilt by > 0.16% in the long run? Betterment's statement is basically that it is riskier, but has the potential to outperform in the long run. Any reason a young investor with a long time horizon would definitely not want to use this portfolio?

FamousWalrus
Posts: 8
Joined: Wed Oct 05, 2016 6:56 pm

Re: New Betterment Portfolio Strategies

Post by FamousWalrus » Thu Sep 14, 2017 8:50 pm

Per portfolio visualizer, GS Active Beta seems quite complex/expensive for pretty weak to negative factor exposure. No more than a marketing scheme.

Factor Returns: Fama/French Research Factors
Stock Market: Global
Four Factor Model (Market Beta, Value, Size, Momentum)

GS ACTIVE BETA MODEL
BETA 1.02
SIZE -0.26
VALUE -0.08
MOMENTUM 0.17
*important to note the GS ETFs are only 2 years old, if that matters for this analysis.

100/0 BETTERMENT MODEL
BETA 1.03
SIZE -0.11
VALUE 0.07
MOMENTUM -0.03

User avatar
tfb
Posts: 7729
Joined: Mon Feb 19, 2007 5:46 pm
Contact:

Re: New Betterment Portfolio Strategies

Post by tfb » Fri Sep 15, 2017 2:45 am

sunnywindy wrote:
Thu Sep 14, 2017 2:03 pm
It all seems weird. I thought ROBO accounts existed to make investment decisions for you.
Exactly. An advisor is supposed to advise. Now it's actually a robo model portfolio maintainer.
Harry Sit, taking a break from the forums.

columbia
Posts: 504
Joined: Tue Aug 27, 2013 5:30 am

Re: New Betterment Portfolio Strategies

Post by columbia » Fri Sep 15, 2017 6:14 am

It's a great marketing technique. ;)

In pretty sure that they are touting both higher risk and lower volatility. God's speed on that mission....

columbia
Posts: 504
Joined: Tue Aug 27, 2013 5:30 am

Re: New Betterment Portfolio Strategies

Post by columbia » Fri Sep 15, 2017 6:14 am

It's a great marketing technique. ;)

In pretty sure that they are touting both higher risk and lower volatility. God's speed on that mission....

azanon
Posts: 1511
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR
Contact:

Re: New Betterment Portfolio Strategies

Post by azanon » Fri Sep 15, 2017 12:53 pm

Then if you like what Cambria does (Meb Faber), you can get a Meb Faber type portfolio using Betterment's platform via cambriainvestments.com - for a small nominal ER fee of about 0.75% :mrgreen: (plus the Betterment platform fees).

columbia
Posts: 504
Joined: Tue Aug 27, 2013 5:30 am

Re: New Betterment Portfolio Strategies

Post by columbia » Mon Sep 18, 2017 7:08 pm

Betterment website 2015:
Is ‘Smart’ Beta Just Expensive Beta?
Dan Egan
Managing Director of Behavioral Finance & Investing
Betterment
Are ‘smart’ beta funds good for investors? So far, the answer is no.
Originally published: June 16, 2015
KEY TAKEAWAYS'Smart' beta funds are billed as offering the possibility (but not the guarantee) of higher risk-adjusted returns compared to the market.That possibility comes with a price. 'Smart' beta funds tend to have higher management fees, transaction costs, and tax costs.

With high-fee active managers and hedge funds in decline, and technology lowering much of the cost of day-to-day investment management, how can a fund manager justify a higher-margin product? Judging by the past, such a product would likely play on consumers’ desire to beat the market, without trading off liquidity, concentration, or opacity risks.

Enter ‘smart’ beta funds, the newest in a long line of investment funds offering the possibility (not the guarantee) of higher risk-adjusted returns compared to the market. The investment decisions of these new funds aren’t based on gut feel and the networking ability of a human advisor; they use quantitatively designed algorithms. They are often marketed based on hypothetical historical data regarding various factor risk premia. They cost up to 600% of similar normal beta ETFs. And they are growing quickly.

But, are they good for investors?

So far, the answer is no.


https://www.betterment.com/resources/in ... sive-beta/

Explorer
Posts: 121
Joined: Thu Oct 13, 2016 7:54 pm

Re: New Betterment Portfolio Strategies

Post by Explorer » Wed Sep 20, 2017 6:08 am

I have begun to add to the "Aggressive Target Income" allocation of Blackrock Income Portfolio. It has an expense ratio of 0.375% (plus the 0.25% Betterment management fee) which brings it to 0.63% effective expense ratio.

You will get quarterly (at least) rebalance, TLH and current yield of 4.25%.... the portfolio is heavy into Emerging Markets Government Bonds and Emerging Markets High Yield Bonds. Just be very clear that the short-term risk for this portfolio is equity-like -15% to +22% in a year.

Make no mistake -- it is not a very conservative portfolio even though Betterment website says it is.... :shock:

I already hold the world famous PIMIX (PIMCO Income Fund) which is a multi-sector go-anywhere bond fund that employs leverage, shorting and other techniques yielding about 5.2% distributions. But.. I do not want to load up on PIMIX (who knows when good things will end?).

This Blackrock portfolio is an alternative means of creating a multi-sector bond portfolio that chases yield, rebalances at least quarterly, gives you tax loss harvesting etc without leverage and shorting features of PIMIX.

So... I see this as a 'pseudo active bond portfolio' and an alternative to funds like PIMIX.

Bottomline: Given its risk attributes I would not personally employ this portfolio in a tax-deferred account but instead invest in a taxable account where TLH could be advantageous. { I have no issue paying ordinary taxes on my bond distributions to Uncle Sam when the portfolio is yielding much much higher than savings accounts - :wink: }

Best Regards

nervouscorps
Posts: 26
Joined: Sun Jan 05, 2014 8:01 pm

Re: New Betterment Portfolio Strategies

Post by nervouscorps » Wed Sep 20, 2017 8:35 pm

Thanks for your comments Explorer, I am liking the blackrock allocation too. Like you, I don't want to load up on PIMIX/PONDX.

azanon
Posts: 1511
Joined: Mon Nov 07, 2011 10:34 am
Location: Little Rock, AR
Contact:

Re: New Betterment Portfolio Strategies

Post by azanon » Thu Sep 21, 2017 7:04 am

sunnywindy wrote:
Thu Sep 14, 2017 2:03 pm
It all seems weird. I thought ROBO accounts existed to make investment decisions for you.
So true. Didn't this all start to ease our worries and give us one simple solution? Back in the old robo days, you only needed to give your age and goal for the money, and they'd take care of the rest.

Post Reply