Historical Performance Calculations And Presentation Methodology
HISTORICAL PERFORMANCE CALCULATIONS AND PRESENTATION METHODOLOGY
Data and Performance returns shown are for illustrative purposes only. Though we have made an effort to closely match performance results shown to that of the Betterment Portfolio over time, these results are entirely the product of a model, including the results from when we began operations in 2010 to the present day. Actual individual investor performance has and will vary depending on the time of the initial investment, amount and frequency of contributions, intra-period allocation changes and taxes. Additionally, this tool illustrates past performance of the Betterment portfolio, but is not and cannot be indicative of future results.
The Betterment Portfolio is comprised of Exchange Traded Funds (ETFs) which are each similar to a number of common equity and bond indices. Model results and volatility of the Betterment Portfolio over a given timeframe are likely to be similar to a comparable blend of these indices, but it is possible that the Betterment Portfolio would have performed better or worse than the comparable blend of indices. These differences may be due to, but are not limited to, portfolio rebalancing, dividend reinvestments, fees and the impact of market conditions on Betterment’s advice.
Historical Portfolio Composition
The Betterment portfolio is currently comprised of 12 ETFs, six stock and six bond.
Betterment customers can specify an allocation between “stocks” and “bonds”. This choice corresponds to particular weighting of the underlying ETFs. As an example, if 20% bonds(80% stocks) is chosen today in a taxable account, this will be equivalent to 11% Municipal bonds, 1% US Corporate Bonds, 5% International Bonds, 3% Emerging Market Bonds, 15% US Total Market Stock, 15% US Large Cap Value Stock, 5% US Mid Cap Value Stock, 4% US Small Cap Value Stock, 34%, Developed Market Stock, and 8% Emerging Market Stock.
Returns and Performance
Betterment was founded in 2008, and our first investment of client funds was in 2010. In order to show performance of the portfolio prior to 2010, we use the returns history of the same ETFs to exactly mimic how Betterment would have performed. For time periods prior to the existence of each ETF, we use the returns of the best benchmark or proxy index for that ETF available at that time. Proxy benchmark index choices are based on the correlation of the ETF and the benchmark during the time they both existed. In some cases, multiple benchmarks are used depending on the best available at each point in time. While we believe this methodology results in a portfolio that was most similar to the Betterment Portfolio prior to its existence, it is not, and cannot be, completely precise.
The proxy benchmarks used and switch dates are as follows:
|Asset Class||ETF Name||Proxy||Switch Date|
|US Total Stock Market||Vanguard US Total Stock Market||Wilshire 5000||5/30/2001|
|US Large-Cap Value Stocks||iShares S&P 500 Value||S&P 500 Value||5/25/2000|
|International Developed Stocks||Vanguard FTSE Developed Markets||MSCI EAFE||7/25/2007|
|Emerging Market Stocks||Vanguard FTSE Emerging Markets||MSCI Emerging Markets||3/9/2005|
|US Mid-Cap Value Stocks||iShares Russell Midcap Value||Russell Midcap Value||7/23/2001|
|US Small-Cap Value Stocks||iShares Russell 2000 Value||Russell 2000 Value||7/27/2000|
|Asset Class||ETF Name||Proxy||Switch Date|
|Short-Term Treasuries||iShares Short Treasury Bond||3-Month Treasury Bill Rate||1/10/2007|
|Inflation Protected Bonds||Vanguard Short-Term Inflation-Protected Securities||Barclays U.S. Treasury Inflation-Protected Securities 0-5 Year||10/15/2012|
|US High Quality Bonds||iShares Core Total U.S. Bond Market ETF||Barclays US Aggregate||9/25/2003|
|US Investment Grade Bonds||iShares iBoxx Investment Grade Corporate Bond||iBoxx Liquid Investment Grade||7/25/2002|
|International Developed Bonds||Vanguard Total International Bond||Barclays Global Aggregate ex-USD Float Adjusted RIC Capped||6/3/2013|
|Emerging Market Bonds||Vanguard Emerging Markets Government||Barclays USD Emerging Markets Government RIC Capped||6/3/2013|
|US Municipal Bonds||iShares National AMT-Free Municipal Bond||S&P National AMT-Free Municipal Bond Index||7/6/2007|
* ETF and Benchmark Proxy Index Data Sources:
All returns series start in January 2000.
ETF Data Source: Xignite
Wilshire 5000 Index: Xignite, Wilshire Website
S&P 500 Value Index: Xignite
Russell Midcap Value Index, Russell 2000 Value Index: Russell Website, Vanguard
MSCI EAFE Index, MSCI Emerging Markets Index: MSCI Website, Vanguard
Barclays Capital Indices: Barclays Capital Website, Vanguard
- Performance Returns are calculated using the Time-Weighted Rate of Return methodology that adjusts for external cash flows.
- Performance of ETFs and Benchmark Indices includes the reinvestment of dividends, which is the default behavior of the Betterment Portfolio.
- Unless otherwise stated, performance is net of the current Betterment Digital fee of 0.25%, which is charged quarterly, based on the average balance over the quarter. Underlying ETF fees are included in the prices for the times they existed, but benchmark proxies do not include any underlying fees.
- Monthly contributions are assumed to be made at the end of the month, and made in the same allocation as the user selection.
Tax Loss Harvesting+ (TLH+) Assumptions
- Performance was calculated using the Internal Rate of Return of the portfolio and includes the reinvestment of dividends, fees and taxes into the portfolio.
- Unless otherwise stated, performance is net of a standard Betterment fee structure (0.25% for balances below $100k, and 0.15% thereafter). This fee is charged quarterly based on the average balance over the quarter.
- Underlying ETF fees are included in the prices for the times they existed. For periods requiring proxy data, benchmark performance was perturbed downward at a rate consistent with current investment vehicle fee and expense structure.
- Unless otherwise specified, these estimates do not factor in any additional taxes that might be owed on an eventual liquidation of some, or all, of the portfolio.