I’ve been using Personal Capital to track my finances for about 4 years now and it has been an invaluable tool in our journey to financial independence. Personal Capital is a free “account aggregator” that will help you track all aspects of your finances in one place. I use the site to track our net worth, account balance, investment fees, and asset allocation. You can also sign up for the optional wealth management service if you need a financial advisor. I’ll focus on the free services and touch on the investment management at the end.
Personal Capital has come a long way since I started using them in 2012. Now, over a million people use Personal Capital to track over $245 billion. When I first signed up with Personal Capital, the site was still new and it had a few problems. I couldn’t link my local credit union and my 401k, but that was quickly remedied. Now, you can link pretty much any bank and online stock brokerage to your Personal Capital account. However, there are still a few accounts that do not link well. The Treasury Direct website seems to be the major one that does not work with Personal Capital. This is where we have our I Bonds. Being a federal site, the security is airtight and it doesn’t play well with any account aggregator. I created a manual entry for I Bonds and that works well enough because the value of the account does not change much. The other sites that I couldn’t link to are KickFurther and Digit. These sites are relatively new, so I understand. They are a very small part of our net worth so it isn’t a big deal to me.
Let’s go through all the features at Personal Capital.
Net Worth Tracker
Despite a few shortcomings, the net worth tracker works very well. I could get a quick snapshot of our finances without having to log on to every account separately. Our bank accounts, brokerage accounts, retirement accounts, college savings account, P2P lending account, PayPal, credit cards, mortgages, and real estate properties are all accounted for. Yes, you can link to Zillow to keep track of value of your homes. That’s the spike you see at the end. Portland real estate is on fire and it is inflating our net worth a little bit. It is gratifying to see our net worth increase overtime.
Cash Flow Tracker
Actually, I don’t use the transaction tracker much. Our finances are just too complicated. On the income page, there are 443 entries for the last 30 days. Most of these are small payments from my P2P lending account at Prosper. In addition, there is income from dividend, interest, rental, business, and Mrs. RB40’s job. The spending page is a little better, but there are still a bunch of business expenses. Perhaps I shouldn’t have linked my business accounts. In addition to cash flow tracking, you can also see upcoming bills and their due dates. Lastly, I heard that they are planning to add a budgeting tool soon. That would be a helpful feature to many users.
Anyway, I prefer to do my accounting the old fashioned way – once a month on an excel spreadsheet. It’s just easier to check the monthly statement and manually enter the monthly gains/losses. The transaction tracker probably works better for people with fewer accounts.
Stock Portfolio Tracker
The stock portfolio tracker is a way to quickly check up on your total portfolio. I like this one because I can get a lot of information from the aggregate of my accounts. Previously, I kept track of our asset allocation on a spreadsheet and it takes a lot of manual data entry to get a big picture. Personal Capital made this easy by putting everything in one page.
I can see that our current asset allocation is mostly in line with my target asset allocation. This tool will be very useful when we have a major stock market correction. I can quickly check if our asset allocation gets out of whack and then rebalance accordingly. If you’re new to investing, Personal Capital can help you come up with a target asset location. We’ll talk more about that a bit later.
I can also quickly check how our total portfolio performs against various benchmarks. As expected, our portfolio performs somewhere between the US Bond market and S&P 500. I don’t check this very often because we invest for the long term and short term performance shouldn’t dictate how we invest.
Here is how our US investment is spread throughout each sector. The idea is to spread your investment among different sectors to improve your diversification. Each sector behaves differently in various economic conditions so you don’t want to concentrate all your investment in one sector. I encourage you to read up on “Modern Portfolio Theory” to learn more about sector weighting. Our US portfolio has been habitually low on utilities, communication, and basic materials. I guess I should sell some stocks in the consumer defensive sector and spread the cash out a bit, but I just hate selling so I keep putting it off. At least, we are not overweight in technology and financial services. This is probably where a financial advisor would be helpful to push me to optimize our portfolio in a timely manner.
The investment checkup tool has expanded quite a bit since I signed up in 2012. Back then, I think they just showed how your portfolio stacks up against the target asset allocation. Now, you can get a comprehensive view of your portfolio and receive some advice from Personal Capital’s algorithm.
First, Personal Capital will calculate a target asset allocation based on your profile. The target asset allocation is based on age, risk tolerance, and other factors. There are 11 different levels of target allocation starting from Capital Preservation to Aggressive. Based on my profile, they recommended the “Growth” target for me. This is #9 out of 11 and I’m comfortable with it. In my 20s, I’d probably go with the most aggressive target which has very little bonds and more stocks.
You can also see the following in this Investment Checkup screen.
- Historical Performance – See how your current allocation performs against the target allocation. I don’t pay too much attention to this because the back testing is static. Your asset allocation will change depending on your risk tolerance which usually decreases as you get older. Our bond holding is a bit high right now because I think the stock market will crash soon. I plan to sell the bond and move some cash into the stock market at that point.
- Future Projections – Personal Capital uses the Monte Carlo simulator to project how much your portfolio will be worth at the time of your retirement.
- Risk & Return – In this section, they construct an “efficient frontier” graph according to the modern portfolio theory. This balances the level of risk and return to maximize your performance at the level of risk you are comfortable with. Basically, you want the X to be near the green O, the target allocation. See the graph below. My X is a bit behind the target, but that’s expected because we have more bonds than recommended at this time.
- Allocation Comparison – The algorithm will check your asset allocation, compare it to the target allocation, and make a recommendation. It tells me to sell bonds and buy US stocks. This is a good reminder to rebalance your portfolio.
- The Stock Tab – You can take a closer look at your individual stocks.
- Concentration – You can see your largest individual stock positions here. I think it will flag a risk if any single holding is over 3% of your portfolio.
- Sector – You can check your sector weighting against the S&P 500 and the tactical weighting strategy.
- Style – Here, you can see check your asset class allocation vs the S&P 500 and the tactical weighting strategy. This one is pretty useful because you don’t want to put all your investments in one asset class. See the image below.
- The Cost Tab – Personal Capital will go over your total portfolio and flag any high fund fees. We pay about 0.07% each year in fund fees which is pretty good.
Whew, that is a lot of information. I only go over the investment checkup every 6 months or so. All this stuff shouldn’t change much from day to day anyway.
The Retirement Planner
Personal Capital released the Retirement Planner in 2015 and it quickly became my favorite part of the site. The Retirement Planner is a great retirement calculator that takes real time data into account and you can add many parameters.
From the image above, you can see that our portfolio will slow down when Mrs. RB40 retires at 45. Next, it will really take a hit when RB40Jr goes to college for 4 years in 2029. We’ll bring it back up when we sell our rentals and take profit at age 61. We’ll be home free once Social Security benefits kick in. In the median case, we’ll end up with over $6 million when we’re 93. In the 10th percentile case, we still will have around $2 million left. Pretty cool, isn’t it?
Here are all the parameters I entered into the retirement planner.
- Savings – $1,350,000 today with no more additional savings in the future.
- Social Security – $17,000 per year at age 67.
- Social Security (Spouse) – $17,000 per year at age 67.
- Rental – $5,000 per year for 20 years. This is a bit optimistic…
- Blogging – $40,000 per year for 20 years.
- Dividend – $11,000 per year.
- Sell Rentals – $1,000,000 at age 61. This might be too optimistic too….
- Retirement Spending – $52,830 per year starting at age 45, Mrs. RB40’s retirement date. This value is pulled from our spending data.
- Health care – $12,000 per year for 15 years starting at age 45. This is probably too high. I will need to modify this number in a few years when we see the real cost. Health care is so crazy here in the US.
- International Travel – $20,000 per year for 30 years starting at age 46.
- College – $80,000 annually for 4 years, starting in 2029.
The retirement planner is the best free retirement calculator on the internet. It is easy to modify various parameters and see how they could change your retirement budget. All in all, I really like this recently added feature.
401k Fee Analyzer
You can see how much fee you are paying in your retirement accounts in the 401k Fee Analyzer.
We pay about 0.15% every year in fees. That’s pretty good, but the fees still add up to $124,781 over 23 years. That’s a lot of money… I paid nearly ten times the fees when I first started investing and I’m really glad we moved to low fees index funds. The fund with the highest fee in our account is VNQI, Vanguard Global REIT. VNQI’s fee is 0.35%. This might be a case of over-diversification. I probably should just move everything to VNQ, the US REIT, which has performed much better over the last few years. I’ll put this on my to-do list.
Investment Management Service
Whew, that was a lot of things to go over. It is fantastic that we receive this much benefit for free. Technology is really great, isn’t it? How does Personal Capital makes money then? Personal Capital is a Registered Investment Advisor (RIA) and they will offer to manage your investment for a fee. This service is available to investors with at least $25,000 in investable asset.
After you signed up for a free account with Personal Capital, they will contact you to set up a complimentary financial planning session. I went through the free financial planning session and it was a good experience. They didn’t do a hard sell or anything like that. In the end, I didn’t sign up for the investment management service because I like DIY when it comes to investing. If you’re not interested in the financial planning session, you can just turn them down. They are not pushy about it.
The investment management fee is a little lower than what traditional financial advisor charges, but higher than other pure “robo” advisors such as Betterment. You get a human advisor at Personal Capital. In addition to helping you manage your investment, they can help figure out insurance coverage, home refinancing, college savings, retirement planning, and estate planning. If you need help managing your wealth, Personal Capital might be a good fit for you.
- Up to $1 Million — 0.89% Annual Fee
- $1 Million to $3 Million — 0.79% Annual Fee
- $3 to $5 Million — 0.69% Annual Fee
- $5 to $10 Million — 0.59% Annual Fee
- Over $10 Million — 0.49% Annual Fee
“Our highest priority is keeping your financial data safe and secure. We use multiple layers of security, in every component of our systems, to keep your accounts and your money safe, and your information private.”
Security is a huge concern in this day and age. It is scary to have all your financial information in one site no matter how strong the security is. The account information you enter in Personal Capital are stored with encryption and they should be safe. Personal Capital’s encryption is rated A by world-renowned Qualys SSL Labs and it is stronger than many banks’ security.
You must authenticate each device that accesses your account via an email or call back. This is good because you’ll know when a strange device is trying to access your account. Lastly, you can’t move money in and out of your linked account so that’s reassuring.
Please contact Personal Capital directly if you have questions about security.
I Recommend Personal Capital
As you probably can tell, I like Personal Capital a lot. I log on every few days to check my balances and glance at our net worth. Personal Capital is also very useful when I need to check our asset allocation. I only do that a couple of times per year, though. The retirement planner is really great whenever I want to add a new variable to our retirement calculation. Personal Capital saves all the data so I don’t have to redo everything from scratch like I had to with other retirement calculators. They also have a mobile app, but I prefer the bigger display in the website version because it is just easier to work with. The free features are very useful to me and I think it is great that they are adding more features every year
All in all, I recommend Personal Capital for anyone who wants to get a better handle on their investments. I can’t rate the paid investment management service because I haven’t used them. The complementary financial planning session should give you a good feel for the wealth management service. If you use them, please share your experience.
You can sign up with Personal Capital for free through this link.
Do you have an account at Personal Capital? What do you think of their free tools?
Disclaimer: We may receive a referral fee if you sign up with Personal Capital through the links on this page.
Image by free pictures of money
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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