US-Only Premium Portfolio

Betterment offers a US-Only Premium (“US-Only Premium”) portfolio strategy exclusively to Premium Betterment investors that want targeted exposure to US-based stocks and bonds with some additional risk relative to a broad-market portfolio (such as, e.g., the Betterment Core portfolio). By taking on risk with the targeted exposure, the portfolio has the potential to under- or outperform based on the return of US markets relative to global markets. 

ETFs selected for the US-Only Premium portfolio strategy are issued by a number of different fund providers and are selected based on Betterment’s investment selection process, which evaluates ETFs for inclusion based on cost to trade and cost to hold the funds. The Betterment US-Only Premium portfolio strategy comprises the following asset classes (subject to change in accordance with Betterment’s portfolio management policies and procedures): U.S. Large Cap Stocks, U.S. Mid Cap Stocks, U.S. Small Cap Stocks, U.S. Inflation-Protected Bonds, U.S. High Quality Bonds, U.S. Municipal Bonds, U.S. Short-Term Treasury Bonds, U.S. Short-Term Investment-Grade Bonds, and U.S. High Yield Bonds.  

The US-Only Premium portfolio is less diversified than the Betterment’s Core portfolio because the US-Only Premium portfolio concentrates investments in those listed on U.S. exchanges, and excludes stocks and bonds in developed markets or emerging markets. This increases an investor’s risk of loss due to adverse economic, business, or other developments that affect those industries or companies within the United States. Reduced diversification also can increase the volatility of the US-Only Premium portfolio relative to Betterment’s Core portfolio. 

Investors in the US-Only Premium portfolio may incur additional fund costs compared to investors in the Core portfolio because the ETFs in the US-Only Premium portfolio may have a higher weighted average expense ratio than the range of  funds used in the Core portfolio. The specific fees for each fund in the US-Only Premium portfolio are listed in the funds’ prospectuses, which are available through the Holdings tab in your account.

The US-Only Premium portfolio strategy is only available to Premium clients, and Premium clients must affirmatively elect the portfolio strategy through consultations with a Betterment financial consultant. In the event you downgrade from Premium, fail to maintain an account balance eligible for Premium services, or otherwise cease to remain a Premium client, you acknowledge that Betterment may migrate your portfolio out of the US-Only Premium portfolio strategy to a different Betterment portfolio strategy that is supported for its digital customers, or may dis-allow future deposits to your US-Only Premium portfolio strategy while you are a digital customer. Portfolio migrations in taxable accounts are subject to taxes, including short-term capital gains. For more information about Betterment’s Premium offering, please refer to the Premium Terms. 

With respect to tax management features, Betterment’s US-only Premium portfolio is compatible with Tax Loss Harvesting+ and Tax-Coordinated Portfolios. With respect to Tax Loss Harvesting+, Betterment typically implements its tax loss harvesting feature by shifting allocations among three ETFs in each sub-asset class. Because the US-only Premium portfolio holds fewer individual asset classes than the Betterment Core portfolio, it may provide fewer opportunities to harvest losses relative to the Betterment Core portfolio. Electing the US-Only Premium portfolio for one or more goals in your account while simultaneously electing a different portfolio strategy for other goals in your account may reduce opportunities to harvest losses due to wash sale avoidance. With respect to Tax-Coordinated Portfolios (“TCP”), goals invested in the US-Only portfolio that are TCP enabled and that include both tax-deferred and taxable accounts, will not be as tax-efficient as goals invested in other Betterment-constructed  portfolios that have TCP enabled and that have both tax-deferred and taxable accounts. This is because, unlike other Betterment-constructed portfolios, the US-Only portfolio will not automatically use municipal bonds in the taxable account. Additionally, unlike the other Betterment-constructed portfolios, the US-Only portfolio will not offer state-specific municipal bonds for CA and NY residents. For more information on Betterment’s tax features and advice, please refer to Betterment’s Tax Loss Harvesting+ Disclosure and Tax-Coordinated Portfolio Disclosure. 

The US-Only Premium portfolio is compatible with Betterment’s other automated portfolio features, such as dividend reinvestment, automatic rebalancing, and Auto-Glide. You should work with your Betterment financial consultant through Premium services to set your desired portfolio strategy, and you must contact Betterment if you wish to make updates to your portfolio strategy.

With respect to rebalancing, Investing portfolios require a portfolio minimum balance in order for a rebalancing transaction to occur (which can be the aggregate of balances in a tax-coordinated portfolio); see Betterment’s portfolio minimum disclosures for further details. If your US-Only Premium portfolio balance exceeds the required minimum, Betterment will perform automatic rebalancing to correct drifts in allocations, aligning back to the target weights. Investors should bear in mind that the US-Only Premium portfolio is less diversified geographically because it is not invested in non-US developed or emerging markets.