Betterment and Goldman Sachs Launch Industry-First Tax-Smart Bonds Portfolio
Betterment and Goldman Sachs Asset Management have launched the Goldman Sachs Tax-Smart Bonds portfolio, an industry-first offering designed to generate after-tax yield for investors in higher tax brackets. This innovative portfolio combines short-duration US Treasury bonds, high-quality corporate bonds, and municipal bond ETFs, with Betterment personalizing allocations based on individual tax situations.
The strategy adapts to market conditions and taxable equivalent yields monthly, considering events that might create volatility. This collaboration leverages Goldman Sachs' expertise in bond markets and Betterment's automation to provide a potentially lower-risk alternative to equity investing for long-term wealth building.
- Launch of industry-first Goldman Sachs Tax-Smart Bonds portfolio
- Collaboration between Betterment and Goldman Sachs Asset Management
- Personalized portfolio allocations based on individual tax situations
- Adaptive strategy considering market conditions and taxable equivalent yields
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Goldman Sachs and Betterment's partnership aims to solve a common problem for investors in higher tax brackets: how to optimize after-tax returns from bond investments. This new portfolio includes a mix of short-duration US Treasury bonds, high-quality corporate bonds and municipal bond ETFs. The key value proposition here is the personalization of bond strategies based on the tax situation of individual investors.
From a financial perspective, this initiative is significant because it merges the expertise of Goldman Sachs in bond markets with Betterment's automated technology to offer a tailored product. Short-duration bonds are generally less sensitive to interest rate changes, which could mean reduced volatility. By considering the taxable equivalent yields and market conditions on a monthly basis, this product aims to adjust dynamically, potentially providing more consistent after-tax yields.
However, investors should be cautious about relying too heavily on automated adjustments. Market conditions can change rapidly and while the strategy aims to reduce risk, no investment is without potential downsides. It's essential for retail investors to assess their risk tolerance and investment horizon before committing to such a strategy. In the long term, this product could provide significant tax benefits, but the short-term benefits depend on individual tax situations and market conditions.
The approach of combining different types of bonds is also noteworthy. US Treasury bonds are considered very safe, while high-quality corporate bonds and municipal bonds offer varying degrees of risk and return. This diversification is particularly beneficial for those looking to minimize risks while optimizing returns.
The introduction of the Goldman Sachs Tax-Smart Bonds portfolio is particularly relevant for high-net-worth individuals in high tax brackets. Municipal bonds are typically exempt from federal taxes and sometimes state and local taxes as well. By including municipal bonds in the portfolio, investors can potentially reduce their tax liability significantly. The focus on after-tax yield is important for these individuals since taxes can erode returns over time, making it essential to consider after-tax returns rather than just pre-tax returns.
Another key point is the personalization aspect. Betterment's ability to tailor bond portfolios to individual tax situations can offer substantial benefits. Tax laws and brackets can be complex and automated systems can quickly adjust to maximize tax efficiency, which could be a significant advantage over traditional investment strategies.
However, it's essential to consider that tax laws can change and what works today might not be as effective in the future. Investors should be aware of these potential changes and consult with a tax advisor to fully understand the implications of such a strategy.
Overall, this product is a smart move for those looking to optimize their after-tax returns without taking on the higher risk associated with equity markets. But it requires a good understanding of one's own tax situation and ongoing monitoring to maximize benefits.
Betterment to Personalize Strategies for Investors Seeking After-Tax Yield
The Goldman Sachs Tax-Smart Bonds portfolio is designed for Betterment clients in higher tax brackets, who want to access a tax-smart bond strategy which is potentially lower risk than equity investing. While high-interest cash savings products can be beneficial for shorter-term needs, taxes can reduce yields over time. This new portfolio offers short-duration bond exchange-traded funds (ETFs), with holdings that Betterment will personalize for its customers based on their tax situation.
By combining short-duration US Treasury bonds, high-quality corporate bonds and municipal bond ETFs, Goldman Sachs designed this innovative strategy to marry longer-term trends with current bond market conditions, rather than maintaining static allocations over time. This approach can adjust the strategy for events that might create volatility such as the COVID-19 pandemic and US debt ceiling debates. The portfolio strategy considers market conditions and taxable equivalent yields monthly, and Betterment may make adjustments, based on individual tax brackets, as appropriate. Betterment then personalizes portfolio allocations for its clients' individual tax situations to seek to generate higher after-tax yield.
"We are thrilled to collaborate with Goldman Sachs to bring an innovative bond portfolio to Betterment customers," said Sarah Levy, CEO of Betterment. "We continue to work tirelessly to provide investment products that support our customers in their long-term wealth-building journey."
"It is important for investors seeking to create and safeguard long-term wealth to consider after-tax returns in their portfolios," said Padideh Raphael, Global Head of Third Party Wealth at Goldman Sachs Asset Management. "This latest collaboration, combining Goldman Sachs's investment capabilities with Betterment's innovative technology platform and customer-first approach, will allow us to work together on behalf of clients who seek attractive after-tax bond yields."
For more information about the Goldman Sachs Tax-Smart Bonds portfolio, please visit Betterment's website.
About Betterment
Betterment LLC ("Betterment") is the largest independent digital financial advisor, using automated technology powered by human expertise to fulfill a singular mission: making people's lives better. With easy-to-use saving, investing, and retirement solutions, Betterment is built to help people optimize their money, no matter their level of experience or how the market is doing. Launched in 2010, Betterment helps more than 850,000 customers manage over
About Goldman Sachs Asset Management
Goldman Sachs Asset Management is the primary investing area within Goldman Sachs (NYSE: GS), delivering investment and advisory services across public and private markets for the world's leading institutions, financial advisors and individuals. The business is driven by a focus on partnership and shared success with its clients, seeking to deliver long-term investment performance drawing on its global network and deep expertise across industries and markets. Goldman Sachs Asset Management is a leading investor across fixed income, liquidity, equity, alternatives and multi-asset solutions. Goldman Sachs oversees more than
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