Personal Capital is a free online wealth management app and it is one of the most useful tools for investors on the internet. I first signed up with them about 9 months ago to see if they can help me manage our various financial accounts. I thought it would be a good time to give an updated impression and introduce new readers to this great tool.
Personal Capital’s goal is to bring wealth management to individual investors like you and me. I have over 20 accounts with various financial institutions and I was able to link most of them so I can get a top down view of my finances at a glance. They also have many investment tools that help you manage and grow your wealth. That’s what really differentiates them from competitors like Mint, another online company that also allows you to review all your financial accounts in one place.
After 9 months
When I first signed up with Personal Capital, there were a few hiccups, but they have improved quite a bit over the last 9 months. Let’s go over what I like and how they improved.
When I first signed up with Personal Capital, I couldn’t link some accounts. They improved quite a bit in this area and I can now link almost all of our accounts. It’s great to be able to look them over quickly to make sure everything is still running smoothly. I’m quite impressed that they were able to link to so many accounts. Here is a list of my accounts:
8 banking accounts. Checking, savings, personal and business. I probably should consolidate these at some point.
- 12 investment accounts. IRAs, 401(k), 529, Prosper.com (peer to peer lending), and other brokerage accounts. This is where Personal Capital is especially useful – don’t miss the asset allocation section below.
- 2 credit cards.
- Exception –Treasury Direct. They couldn’t link to Treasury Direct so I couldn’t see my I bonds. Direct Treasury takes their security very seriously and they will email you a temporary passcode every time you try to log in.
I like having all our accounts in one place because that makes it easy to see our net worth. However, there is a little problem with real estate. I have to update the value of each property manually to get an accurate picture of our net worth. It would be nice if Personal Capital could hook up to Zillow and get the estimated value that way. I guess they are focusing on “investible assets” so they don’t really want to go into real estate too much. It’s not a big deal, but it sure would be nice to have.
Weekly Net Worth Update
In the default setting, Personal Capital will send you a net worth update in an email once a week. I really like this because I can quickly see the changes in our net worth and it’s a reminder to check my investment accounts. You can configure it to send out an email daily, weekly, or not at all.
Tools for Investors
Keeping track of your portfolio with Personal Capital is much more than just seeing the balance. This is where Personal Capital is much more impressive than Mint. You can see how your investment is doing against the market index, check your asset allocation, and much more. They have added quite a few things since I joined so let’s take a quick overview.
RB40 Index VS the World
I can see how our portfolio is doing VS the S&P 500, NASDAQ, DOW, and 10 year bonds. Investing is a bit of an isolationist activity and it’s nice to see how we’re doing against the market. You can select which accounts you would like to compare against the indexes and also change the time frame to 30 days, 90 days, 6 months, or the current year. This is a pretty nice tool that lets me see how our investments are doing VS the world.
There is a limitation here, though. They don’t really keep the history of your account. The tool just takes a snap shot of your portfolio and constructs a historical graph with the current holdings. If you have been active in your accounts, this graph won’t be accurate.
For example, this graph above is Mrs. RB40’s IRA VS the SP500. She hasn’t made any trades this year so this graph is accurate. I, on the other hand, have been very active in my IRA and I made quite a few trades this year. I sold my Apple holdings earlier this year but the profit I made isn’t reflected in this graph since the stock isn’t in my account anymore.
It would be much nicer if this graph could track our real portfolio instead. Hopefully, they’ll be able to improve it at some point. Right now, it’s just not an accurate depiction of performance if you have been trading recently.
Asset Allocation tool
This is another great graphical tool that can show your asset allocation in its entirety at a glance. At the high level, you’ll see Cash, U.S. Bonds, International Bonds, U.S. Stocks, International Stocks, Alternatives, and Unclassified. You can click down to each asset class and see what holdings you have. I’m very impressed with this tool and it’s really cool to see it in action. Check out some pictures here, but I think you really should try it out with your own account. Sign up with Personal Capital through this link.
Click down into U.S. Stocks
Click down into Mid Cap Core
This is why I love Personal Capital. A stock like LEG is classified as Mid Cap Core and it’s easy to place it in your asset allocation chart. On the other hand, mutual Funds and ETFs are made up of many companies and it’s hard to keep track of our asset allocation manually. VB for example is Vanguard’s Small Cap ETF, but the investment is actually spread out into Mid and Small Cap. Here is VB’s allocation according to Morningstar Xray.
Personal Capital made it a lot easier to check our asset allocation and rebalance. Previously, I kept track of our asset allocation in a spreadsheet and it was very painful to rebalance the portfolio. This alone is worth the price of admission (free!) so you really should sign up if you don’t have an account yet.
In the Investment checkup section, we can get a checkup on our asset allocation, risks, and costs.
You can configure your age, retirement target, and risk tolerance in this section. Personal Capital will crank out a Target allocation plan for you and keep track of how it compares to your investment. This is somewhat useful if your target allocation aligns with Personal Capital’s recommendation. It’s good for a gross check up and you’ll have to fine tune your asset allocation yourself.
Currently our allocation is way out of whack because I got scared and pulled back quite a bit on stock investing.
According to Personal Capital, I have two big risks right now.
- Lack of exposure to small caps.
- High mutual fund allocation. I guess I have too much investment in mutual funds. Personal Capital said mutual funds are expensive and investors could do better.
This is temporary and once I rebalance later this year, these warnings should go away.
Personal Capital will go over all your mutual funds/ETF and determine how much you’re paying per year. It’s good to see the total of how much I’m paying per year because it can take a while to figure out manually. Most of my funds have low expense ratios, but nothing brings the point home like seeing the $$$ on the screen. The figure 0.8% doesn’t quite make the same impact as $864 per year. This is much better than the $1,754 I was paying in fee before I started using Personal Capital though.
Free financial consultation
Another thing that I really like about Personal Capital is their free financial consultation upon initial sign up. If your net worth is over $100,000, then their financial advisor will contact you to help review your portfolio. I thought it was quite useful when they went through it with me. They probably are just using a software program to analyze this because I heard from a reader that his recommended asset allocation was quite similar to mine.
Not covered in this article
Cash flow – Personal Capital also keeps track of your income and expense. I don’t use it though because I’m doing this manually on a spreadsheet. Yes, it takes more time, but it also makes it more real. Too much automation can make spending money too abstract for me.
Thanks for the free tools
All in all, I am very happy with Personal Capital. It’s free! What’s not to like? I’m not using them to actually manage my portfolio, though. I’m too cheap to pay 1% off the top and I still enjoy managing our portfolio on my own for now. Their investment management tools are quite useful and are making life easier for me.
Have you used Personal Capital? How do you like it? Is there a better site out there for investors?
Disclosure: If you sign up with Personal Capital, I may receive a referral fee depending on the size of your portfolio.
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.