Indexing Models

Description: Indexing strategies are designed with the goal of keeping pace with the broad markets and keeping fees as low as possible.  These strategies are diversified into ETFs that invest in US Stocks, International Stocks and a variety of Bond ETFs.  The amount allocated to each fund will vary depending on how conservative or aggressive the investor wants to be.

Compared to an Active strategy that manages risk, Indexing (or Passive Investing) is more prone to greater losses during economic downturns.  This approach is best for those with small accounts, those who are less concerned about market risk, and in some cases, those who are concerned about capital gains taxes.

Minimum: No Minimum

Fee: 1% or less, depending on account size

Performance:

Model 2019 (ytd) 2018  2017 2016
Aggressive (90/10) 15.31% -8.74% 20.55% 7.81%
Balanced (70/30) 13.81% -6.73% 16.27% 6.72%
Moderate (50/50) 12.24% -4.81% 12.17% 5,54%
Conservative (30/70) 10.66% -2.95% 8.19% 4.26%

YTD as of 09/30/19.  The indexing model portfolio historical performance numbers are based on a backtest of the ETFs and target allocations in Betterment’s Vanguard model portfolios as of September 2019. All percentage returns include the Betterment fee (0.25%), the maximum Auxan fee (0.75%) and the expenses of the underlying ETFs.  The backtested portfolio includes reinvestment of dividends.  Betterment does offer tax-loss harvesting, which is not factored into these returns.  We exclusively use this Vanguard model for IRA accounts, so leaving out tax-loss harvesting is more appropriate.  Other strategies through Betterment are available for non-retirement accounts and fixed-income strategies, but not enough information is available to produce an accurate backtest.  More information on these other strategies can be found here.  Historical data for the relevant ETFs was obtained from Yahoo Finance.