*This blog post is my personal opinion only and contains affiliate/referral links.
Last Monday, April 6, i got an email from Betterment notifying me that my Safety Net account, otherwise known as my emergency fund, was being rebalanced to 70% Bonds and 30% Stocks. I think i had it at 60/40 prior to that.
The rebalancing strategy is one of the automated features of investing with Betterment. Betterment users always have the option to choose their own stock/bonds allocation, but this rebalancing intervention is a timely measure on their part.
The Safety Net goal, along with all Betterment goal accounts, consists of ETF stocks and bonds in the US and International market. By design, ETF tracks the market index like S&P 500 or Dow Jones Industrials, in comparison to Mutual Funds which are actively managed by a portfolio manager.
I can list other differences between the two, but basically, “Betterment uses ETFs in both stock and bond portfolios because of the liquidity, diversification, and low management fees.”
A look at AGG, the primary ETF used to gain exposure to U.S. High Quality bonds, shows that it is currently trading at $116, compared to $118 last March 9. To weather the monthly downturn at a $2 loss per share is decent enough, and the same can be said to VTI, the primary ETF used to gain exposure to the entire U.S. stock market, which is only $5 down from a month ago.
As an afterthought, it may be premature for Betterment managers to rebalance my portfolio because the stock market continues to climb in leaps and bounce since April 3. They may have ridden the momentum to the almost 3000 points Dow Jones Industrial Average upturn as of this writing April 9. But as an investor who trust my goal and the professionals who monitor my account, i cannot really fault them.
I have to concede and believe that bonds are good buffers to the current market volatility.
Sometimes i have to leave the hard thinking and number crunching to the experts. It is part of balancing my individual trades and my automated professionally-managed trades. The work of the latter gives me that cushion and time to do the research and analysis on my personal trades with Robinhood.
Having been with Betterment since 2015, i also realized that it reduces my trader’s guilt if i sell at a loss on any of my other personal brokerages, maybe because i know i have a trusted back-up plan with them.
There will be a time when i have to rebalance it myself, but in the meantime it’s a good feeling that i feel my emergency fund investments are protected and i’m not losing sleep in the economic whirlwind we are having.