While adjusting your clients’ portfolios, you will also receive a risk and diversification assessment of your changes.
- Overall Risk Score: This measure shows you how the overall volatility of the portfolio you designed compares to the overall volatility of the recommended Betterment portfolio. The recommended risk level is based on your stated goal and time horizon. Taking too much or too little risk can decrease the likelihood of your achieving your goal.
- Diversification Score: Advisors and most investors are familiar with the importance of a diversified portfolio. The old adage of not putting all your eggs in one basket rings true with investments as well. However, diversification goes beyond just owning a bunch of different asset classes. If you have 10 investments to choose from, and you put an equal 10% of your portfolio in each, you are certainly diversified. But that doesn’t mean you have a well-constructed portfolio. Our Diversification Score goes a step further and provides guidance on not only how diversified your client is, but also on whether they are positioned to seek high expected returns over time.
Please note that Betterment’s automatic allocation adjustment feature is not available for Flexible Portfolios.