Better returns through diversification, yes?
That's faulty logic.
No it's not, it's just a real-world illustration of diversification at work.
We are on the same page but talking past each other, I think.
I'm trying to help our OP friend here from making a rookie mistake of comparing his diversified portfolio with a single index over a very short time period, and giving up on diversification.
While we save for retirement we diversify in order to get better long term returns than the worst performing asset. We don't know which one will be the worst performing. Could be the S&P500. If OP switches to the S&P500 and it is the worst performer after 30 years he'll wish he stayed with the diversified portfolio.
The Betterment portfolio was not developed by their marketing department. It
is based on decades of research. You might not like the value tilts and all. Fair enough, but it is based on academic research. For the rookie who otherwise would not be diversified the Betterment fee can be worthwhile.