Navigating Market Swings: How Betterment’s Users Are Responding Today

Betterment emerged in the aftermath of the 2008 financial crisis, launching in 2010 as the economy was slowly recovering from one of the most severe recessions in history. Over the following decade, this digital investment platform expanded its assets under management to $22 billion, enhanced its service offerings, and capitalized on a prolonged bull market. Its strategy focused on passive investing via ETFs, tax-loss harvesting, and a largely hands-off approach with clients. However, the global outbreak of COVID-19 disrupted economies worldwide, triggering a sharp market downturn that erased trillions in value and reversed previous record gains.

Unlike traditional online brokerages such as Fidelity and TD Ameritrade, which have experienced a surge in trading activity recently, Betterment’s clientele has remained largely steady, with many continuing to add funds to their accounts. The company shared these recent insights:

• Since February 24, 2019, fewer than 2% of Betterment users across Millennials, Gen Z, and Baby Boomers have withdrawn funds
• There has been a 26% higher rate of ad hoc deposits compared to withdrawals
• Among Millennials, 37% more users have made ad hoc deposits than withdrawals

According to Dan Egan, Betterment’s Managing Director of Behavioral Finance and Investing, the minority who are withdrawing funds tend to be younger, primarily male, newer investors, and frequent account checkers. “These individuals often try to time the market, attempting to outpace its fluctuations,” Egan explains. Additionally, some younger clients have made withdrawals from their banking accounts to manage expenses or build emergency cash reserves amid economic uncertainty.

Over the past decade, although there have been periods of market volatility and minor bear markets, the current environment represents one of the most significant psychological challenges for Betterment and other digital advisory platforms—entities that prefer not to be labeled simply as robo-advisors. These platforms leverage advanced technology, cost-effective ETFs, and behavioral finance insights to support investor decision-making. Jon Stein, Betterment’s co-founder and CEO, draws inspiration from John Bogle, Vanguard’s founder and pioneer of passive index investing. Core principles such as dollar-cost averaging, portfolio diversification aligned with individual goals and life stages, and avoiding emotional reactions underpin Betterment’s approach.

Leveraging Technology to Guide Investors

Betterment, alongside platforms like Personal Capital and Wealthfront, integrates behavioral finance with technology to help clients avoid detrimental investment choices. For example, if a user’s portfolio allocation strays from their personalized financial plan, the platform sends digital alerts encouraging reassessment, highlighting potential long-term impacts on retirement goals or tax obligations.

For newer, younger investors who have recently entered the market and faced volatility, Betterment now offers two-year portfolio performance charts to provide broader context. “By presenting historical data, we help clients feel more comfortable with risk by illustrating long-term trends rather than relying solely on verbal explanations,” says Egan.

Proactive Response to CARES Act Provisions

Betterment has observed that clients nearing or in retirement have been quick to adapt to changes introduced by the CARES Act, especially regarding defined contribution plans. With the temporary removal of tax penalties on 401(k) withdrawals up to $100,000, many customers have sought guidance from Betterment’s financial advisors on whether to utilize these provisions or stick with their regular required minimum distributions. “It’s been remarkable how swiftly our clients have grasped these legislative changes and are actively seeking ways to implement them within our platform,” notes Egan.

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