I decided to take the plunge into the world of all-in-one personal finance and investing software. Some folks use Quicken, Mint, or Wealthfront. I looked at all of those, and tried some but they didn’t quite do what I wanted to do. They were either too clunky, cumbersome and time consuming to use, or they didn’t get the investment management part done correctly.
Enter Personal Capital. This is a slick web site that makes managing your finances and investments quicker, easier, and prettier. All your credit cards, checking, banking, investments, 401k’s, IRA’s, and other accounts are in one place, conveniently summarized.
The online investment and personal finance tracking services at Personal Capital are totally free, no strings attached. They also offer a financial advisory service for accounts over $100,000 in value, however they do charge a fee for the professional advisory services. But you can use the investment and personal finance management engine free of charge forever.
My First Time Using Personal Capital
After putting in my username and password, Personal Capital got down to business by asking me to put in all my financial accounts. In about 5 minutes I added:
- Three accounts at investment firms (1 Vanguard and his and hers accounts at Fidelity). This includes 2 brokerage accounts, 8 IRA’s, and 1 HSA
- Two 401k accounts (his and hers) and a 457b account
- 3 savings and 1 checking account at our credit union
- A mortgage loan with a different credit union
- College 529 savings accounts for our 3 kids
- 3 credit card accounts
This process was amazingly easy to get all those accounts consolidated into one place.
To finish linking all of my accounts, I spent another 5 minutes verifying super secret security questions on a few accounts like what’s my dog’s favorite hobby and which tooth did my second grade bestie lose first.
I expected glitches when I was importing my accounts. We have 25 different financial accounts spread across ten different companies or login ID’s. Zero glitches. Everything imported cleanly and accurately on the first try. So far, Personal Capital is doing what it is supposed to – streamline my personal finances and investments.
I tweaked the descriptions of a few similar accounts like our his and hers Vanguard traditional IRA’s. I added my name or Mrs. RootofGood’s name (so I can keep them straight). Editing these descriptions and names is simple – click the little edit button, change your description, click save. Done.
I deleted a few duplicate accounts where they appeared both on my Fidelity login and Mrs. RootofGood’s Fidelity login so that these accounts only show up once on Personal Capital‘s display. Easy again. This step is where I have had problems in the past with Money or Quicken – getting all the accounts to show up once, and only once (and one reason why I never used them).
I manually add in my cash balance pension fund, and another cash balance retirement account (an ESOP). The ESOP account balance will have to be updated annually by me when I receive the statement from the plan sponsor. That’s about the only manual update required since Personal Capital automatically pulls transactions and balances from your myriad financial accounts.
In about 20 minutes I have taken our household’s relatively complicated financial life (27accounts total) and displayed everything on one screen. With pretty, interactive graphs and charts.
After getting all the accounts into Personal Capital, I wanted to play around and explore the different features and displays. Income, spending, cash flow, cash balances, portfolio allocation, overview of investment fees – all easily accessible from the Personal Capital web page. Before using Personal Capital, I had to manually go to all of my investment accounts and credit cards and download then copy/paste the transactions and balances into my own spreadsheets to check on what I was spending or manage my investment portfolio.
My monthy income is right there, categorized and summarized in a colorful graph. Before using Personal Capital, I always knew roughly what we had coming in each month, but this really puts it in perspective with exact numbers and categories. I was surprised our investment income was over $2,500 for the month. I never added it up before, and it is surprisingly large. Now that I’m retired, Personal Capital is going to be a great tool to help me keep track of cash flow and available cash in my accounts.
Expenses are as cleanly presented as income. No surprises here. Our mortgage is the highest expense, and groceries are the next highest. The childcare expense is gone now that I’m retired (which also makes me a stay at home dad).
Investment Asset Allocation
The way my investment portfolio’s asset allocation is presented is probably the coolest part of Personal Capital. I try to keep my US investments roughly equal to my international investments, and the graphic makes it easy to tell that I’m within a percent of hitting that goal.
You can drill down into any specific area in your asset allocation. I wanted to take a detailed look at my US Stock allocation, to see whether I’m sticking with my goal of maintaining a tilt toward small cap and value investments.
I’m doing pretty good. The mid cap and small cap bands together are bigger than the large cap, which is what I want. The value boxes on the left are bigger than the growth boxes on the right. I’m on track.
I also took a peek at cash sitting around in my investment portfolio. Looking at the summary made me realize I have been slightly negligent in investing my cash. I try to stay fully invested. I just discovered I have over $15,000 sitting in a money market account (ticker VMMXX) in my IRA from a recent retirement fund rollover. I also discovered $1,407 sitting in the FDIC-Insured Deposit Sweep, which is our HSA’s cash account. I thought I was pretty diligent in managing my investments, but staring at these cash balances sitting there earning nothing makes me realize I have a little work to do. At least now I have a tool to draw attention to lazy cash sitting around! Let’s get that money making more money!
Personal Capital also has apps on Apple Itunes and Google Play Market (for Android). I’ve used the Personal Capital app quite a bit and it accomplishes most of the same tasks as the desktop version with a different feel and layout.
Give Personal Capital a shot and see how you like the look and feel. I love the interface so far, and it will save me hours each month managing my personal finances and investments.
For those looking for someone else to manage their portfolio, Personal Capital offers wealth management advisory services for a fee.
Per their website, they:
Act in your best financial interest: Personal capital acts as a fiduciary on your behalf and fully abides by the Fiduciary Standard.
Optimize risk & return on your behalf: Personal Capital does this through a smart portfolio management strategy and Smart Weighting™ approach, which incorporates Modern Portfolio Theory and equal sector/size weighting.
Avoid hidden fees: Cut out commissions, transactional and annual fees with one all-in management fee lower than many traditional brokers.
Investment advice when & where you need it: You get full access to sophisticated online tools and personalized advice from registered Advisors by phone, web conference, chat or email.
Holistic financial planning: Personal Capital takes your entire financial life into account, not just the portion they manage.
Tax optimization: Personal Capital applies tax loss harvesting, reallocating assets to tax-deferred accounts, and helps you realize higher yields in your retirement account.
What happens when you sign up with Personal Capital?
Register & link accounts
Link all of your external financial accounts and get a comprehensive view of your financial life. Once you have linked your accounts, schedule a free consultation with a Personal Capital Advisor.
Talk with an Advisor
Personal Capital discusses your investing goals, risk tolerance, retirement and planning for the big stuff like a new baby, starting a business, saving for college or remodeling your home.
Create your plan
You’ll get a comprehensive assessment of your entire financial life. Personal Capital helps you identify your retirement goals to make sure they build an investment plan that fits your needs.
The online personal finance and investment tracking tools are completely free.
For those who want investment management, Personal Capital charges one, all-inclusive annual management fee. There are no hidden fees, no trailing fees and no trade commissions since all of that is covered by the annual management fee.
First $1 Million: 0.89%
The fee drops for clients investing $1 million or more:
- First $3 Million: 0.79%
- Next $2 Million: 0.69%
- Next $5 Million: 0.59%
- Next $10 Million: 0.49%
Personal Capital’s investment strategy
Personal Capital crafted their strategy based on years of research, and their goal is to “establish and maintain a strategic investment portfolio which gives every client the best chance to achieve their financial goals.”
Personalized asset allocation
They consider current interest rates and equity valuations, and their likely impact on future returns, but use historical risk and return data as an objective starting point for determining an optimal asset class mix.
Here’s a snapshot of historical asset class risk and return. Risk is measured by standard deviations from the mean.
The goal of the asset allocation is to get you to the “efficient frontier” – one where a move up or down the curve brings you the highest level of return in exchange for taking on a certain level of risk.
More diversification to achieve better returns
Unlike a passive index fund approach, Personal Capital chooses particular sector weightings to focus on within their asset allocation they develop for you. The idea behind this strategy is to avoid overweighting sectors that have grown to dangerous heights with the intent to reduce the overall risk in the portfolio.
Personal Capital’s tax optimization focuses on three key areas:
- Tax allocation
- Tax loss harvesting
- Tax efficiency
Tax allocation: High yield investments work best in tax deferred (traditional IRA/401k) or tax free exempt accounts (like Roth IRAs). Lower yield investments are placed in taxable accounts.
Tax loss harvesting: Investments that have losses are sold and shifted into other investments. Realizing these capital losses offset other capital gains and can even offset ordinary income up to $3,000 per year.
Tax efficiency: Picking the right investments that don’t generate unnecessary taxable distributions
Additional Personal Finance Services offered by Personal Capital
Wealth management clients of Personal Capital receive more than money management.
Other services include advice on:
- Retirement Planning
- Estate Planning
- Home Purchases & Refinancing
- Stock Options & Deferred Compensation
Home Purchases & Refinancing
Stock Options & Deferred Compensation
Well, that’s Personal Capital in a nutshell. I’ve been happy using the personal finance and investment tracking tools so far. Expense tracking is a CRITICAL component of reaching financial independence and Personal Capital makes it so much easier to automate my expense tracking.
I haven’t used their wealth management service since I’m a big fan of do it yourself investing, but I’ve laid out the services they offer for those interested in for-fee wealth management.
Let me know your experiences with Personal Capital if you try it out! Anything I’m missing?
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