New Betterment Portfolio Strategies

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bzargarcia
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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
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Vegomatic
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Re: New Betterment Portfolio Strategies

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

Bart: Thanks.

nervouscorps
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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.

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sunnywindy
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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.
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baenregod
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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
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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

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tfb
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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
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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
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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
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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
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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
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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
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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.

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