Personal Capital is one of my favorite money management tools, and one I use frequently to track my investments and my spending. This review will show you how powerful it can be, and why anyone who is serious about managing their money should open a free Personal Capital account today!
Why Personal Capital? Because investing can be tricky. I’m not referring to advanced investment strategies, binary trading, and things like derivatives, which virtually no one understands. Investing can be tricky even if your investment portfolio holds nothing more than a sampling of index funds, bonds, and a handful of individual stocks. Taken by themselves, each of these investments is easy to understand. But it can be difficult to understand how everything fits together.
Unless you have access to professional investment tools or are willing to spend a monthly fee for some of the premium consumer tools, you are probably kept in the dark on how your investments fit together. But PersonalCapital.com is changing that.
Personal Capital is a financial startup similar to Mint.com, a well known, free money management tool. But Personal Capital is much more powerful than Mint.com – especially for investors. It’s also a more user-friendly (and free) alternative to Quicken.
And the best thing? It’s free to use. I recently opened a Personal Capital account, and I’m happy to share its features with you today, including the problems it solves,
Why Managing Your Investment Portfolio is so Difficult
The biggest problem I have with investing is understanding how my investments fit together. It’s important to balance your investment portfolio once a year, or whenever you have a major life change. But that can be a time-consuming process when your investments are scattered across several accounts.
The average worker changes jobs 10 times by the age of 42. That leaves the opportunity for multiple 401k plans or other employer-sponsored retirement plans, multiple IRAs (learn more about Roth IRA accounts here), taxable stocks and bonds, brokerage accounts, and other investments.
Seeing all of these investments in one place can be difficult. More importantly, there is often an overlap between some of the index or mutual funds you own. Here are some of the typical problems experienced by investors like you and me:
- Many different investment accounts (IRA, 401k, brokerage accounts)
- Difficulty of understanding how multiple mutual funds affect portfolio balance
- Difficulty of seeing all financial accounts in one place (investments, and cash accounts)
Thankfully, there is a solution to all of these problems – and it’s free.
Personal Capital – Free Portfolio Management Software
Personal Capital is the best free money management tool I’ve seen. Let’s take a quick overview, and then I will dive into more details on some of the features.
- Cash Manager. See all your income and expenses in one place.
- View all financial accounts in one place. Quickly and easily sync your banking and investment accounts and receive automatic updates of your holdings. You can also track your credit cards, spending mortgages, and other loans.
- Track fees and expense ratios. Mutual funds have different fees and expense ratios, making it difficult to calculate how much you are paying for each investment. This is a huge benefit for people with 401ks.
- Detailed asset allocation. See how all of your investments work together (this feature was previously only found in expensive paid software programs)
- Asset allocation alerts. Set your preferred asset allocation and receive alerts when your holdings fall outside your desired balance.
- Mobile apps. Personal Capital currently offers apps for the iPhone and iPad, and Android phones.
- View your Net Worth, Account Balances and Transactions, and Income Reports
- Spending by Account, Category, and Upcoming Bills
- Investment Returns
- Top Gainers and Losers
- Projected Investment Fees
- And more.
Using Personal Capital – Video Tutorial
The following video shows you an in-depth overview of how to use Personal Capital to manage your cash flow and investments. As you can see from the video, it is a powerful tool!
The rest of this Personal Capital review covers additional features not found in the video. Overall, this is my favorite financial app – it’s powerful, easy to use, and best of all, the Personal Capital online app is free to use!
Personal Capital Cash Manager
The Personal Capital Cash Manager is great as a budgeting tool and to help you visualize how much you have coming in and going out each month. You can give descriptions to each transaction, and the system will remember them the next time they are entered – saving you time, and helping you accurately track your savings money in and out.
I find this tool to be fairly accurate out of the box, and you can make quick tweaks to your line items to quickly view your spending patterns. This actionable data can help you find ways to cut spending and use your money in ways you find to be more meaningful.
View All Your Investments & Accounts in One Place
The Cash Manager described above is similar to many other budgeting tools, but Personal Capital shines where many other software programs fall short. Most of the financial tools out there are geared toward budgeting, and while they allow you to track your investments, they don’t always offer much insight to their performance, fees, asset allocation, and similar details. And those details are essential for investors.
The screenshot below is the Dashboard, which gives users the ability to see a bird’s eye view of their spending, investments, recent investment performance, net worth, and more. (Note: These screenshots are from a test account, not mine!).
Personal Capital allows you to sync your investment accounts and view their performance in real-time values.
Track Your Net Worth Over Time
By itself, net worth isn’t the most important aspect of your financial situation. However, tracking your net worth over time can be a powerful way to visualize your financial progress. By default, Personal Capital shows your net worth when you log into your account.
I like being able to see this snapshot, as I can track both major and minor changes without much work. And you know your information is always up to date, since Personal Capital syncs with your financial accounts.
Here is what the Personal Capital net Worth Tool looks like:
As you can see from the image above, you can see your net worth over time. You can also view specific periods, such as the last month, year to date, last year, and other periods, going back to as long as you have had your Personal Capital account (I am not aware of any way to import historical data, so the sooner you open your account, the longer the period of data you will have access to).
Monitor Investment Costs and Expense Ratios
Each mutual fund has an associated management fee. This is unavoidable and helps cover the cost of running the fund. But not all expense ratios are created equally. In most cases, you want to minimize the fees you pay as much as possible. Personal Capital helps you see exactly how much you are paying in fees across the board, helping you make an informed decision about the investments you are holding.
The Personal Capital 401k Fee Analyzer is very valuable for people who have a 401k plan, as many 401k plans are difficult to optimize due to limited investment options, and fees which aren’t always easy to understand. This tool helps you maximize your returns by reorganizing your investments into funds which have similar holdings and performance, but lower expense ratios.
Detailed Asset Allocation Reports
Understanding the total asset allocation of my investment portfolio is one of the biggest problems I’ve had while managing my investments. I have multiple retirement accounts (IRAs, solo 401k, Thrift Savings Plan), my wife has retirement accounts, and we have some taxable investments in the form of some mutual funds and individual stocks.
Each of the funds in our accounts is made up of multiple stocks, bonds, and other funds. While we try to keep things optimized, there will inevitably be some overlap in our holdings. Using Personal Capital was an eye-opener for me, and I’ve already taken some action based on how my investment portfolio was previously allocated.
The above asset allocation example shows a portfolio that needs some attention based on the user’s age, holdings, and risk tolerance.
Asset Allocation Alerts
When you create your Personal Capital account, you fill out your age, investment timeline, and investing style (very conservative, conservative, moderate, aggressive, and very aggressive). The asset allocation tool within Personal Capital assigns you an asset allocation based on these inputs.
You aren’t able to modify this, which is fine for most investors, but could be seen as a limiting factor for some more advanced investors. You can set up daily or weekly alerts and you will receive an update if your asset allocation falls outside of the preferred allocation recommendations.
Personal Capital Retirement Planner
Free Retirement Planner. The Personal Capital Retirement Planner will help you to determine whether or not you have enough money saved for your projected retirement. This tool helps you set and determine spending goals, income events and projected future portfolio value. You can also create “what if” scenarios to test different situations and potential outcomes.
This is a powerful, and free, tool. Here is more information on the Personal Capital Retirement Planner tool.
Additional Benefits and Tools
Here are some more benefits for Personal Capital users:
- Portfolio Performance
- Asset Allocation
- Mobile Apps
- Investment Checkup
- 401k Fee Analyzer
- Mutual Fund Fee Calculator
- Universal Checkbook – like online bill pay, but directly from your Personal Capital account
- Real-time updates
- Educational Videos for creating an investment strategy
- Personal Capital 401k plan – they run a 401k plan for small businesses.
- Security – they utilize military grade algorithms and require you to register each computer you use. (I even had to register again when I used a different browser on the same computer).
How is it Free?
Personal Capital is a free tool, but they do have a business plan in place. They are listed as a Registered Investment Advisor (RIA), which means they are able to offer financial advice. In other words, you could hire Personal Capital to manage your money, or a portion of your money, for you. To qualify for these services, you must have at least $25,000 in assets, and you would have to pay a fee to use this service. Two important notes here:
- This is a non-obtrusive feature. If you have over $25,000 in assets a financial manager will reach out to you, but that is as far as they go. They don’t hound you or constantly upsell you on services. If you want to use the service, it is there for you. Otherwise, you won’t hear about it again. That’s a great feature you won’t find with many other free services.
- Objective advice. Being an RIA means they have a fiduciary duty to give you the best financial advice for your situation, not the advice which nets them a bigger commission. One of my biggest gripes about the financial planning industry is that brokers don’t always have a fiduciary duty to their clients. Some of them are more concerned about their interests instead of their clients. That is not the case with Personal Capital (from their site):
Objective Advice. The sorry truth is that bankers and brokers are motivated to help themselves, not you. They are salespeople paid to push products, earning commissions and kickbacks when they do. In stark contrast, Personal Capital is an investment advisor. We accept a fiduciary obligation to act in your best interest, and our advice must be aimed at making money for you, not for us.
You do not have to hire Personal Capital to manage your money for you, but if you do, you can rest assured knowing they have your best interests in mind. That is music to my ears and makes me comfortable recommending this service to my friends and family.
Investment Management Fees
Again, using Personal Capital’s wealth management feature is completely optional, and there is no hard sell to do so. If you wish to use their services, you will have to pay an annual fee based on the value of your holdings, which is a common compensation model. There is a minimum investment of $25,000 to use Personal Capital’s Wealth Management Service. As always, you will want to shop around to find the right choice for your investment style. Here are the annual fees Personal Capital charges for their investment services:
- First $1 Million – 0.89%
- First $3 Million – 0.79%
- Next $2 Million – 0.69%
- Next $5 Million – 0.59%
- Over $10 Million – 0.49%
Personal Capital vs. Mint
Mint.com is one of the most popular online money management tools, and several people have asked me how the two services compare. They are similar in that they both give users the ability to track their income, expenses, investments, and net worth. However, Mint.com is more geared toward budgeting and managing spending.
Personal Capital also offers cash management and budgeting features. However, Personal Capital also gives investors much more insight into their investment portfolio. Here are some more differences:
- Mint.com: Primarily focused on budgeting and tracking spending.
- Mint.com: Not much insight into investments, including asset allocation, expense ratios, and alerts
- Mint.com: lots of upsells for different financial products and services.
- Personal Capital: Investor focused; tools are geared toward tracking investments and balancing your portfolio.
- Personal Capital: Receive alerts when your portfolio falls out of balance.
- Personal Capital: Ability to hire a financial planner to help you with your investments.
- Personal Capital: Track your investments and net worth in real time.
You can read our full Personal Capital and Mint.com comparison for more information on these two services.
How to Open a Personal Capital Account
Opening an account is free and easy. Simply go to their website, and open a Personal Capital account. It is free and secure (they use military level security, according to their site). When you open your account, you will be prompted to enter an email address (no name is required; your account is only tied to an email address).
After opening your account, you will need to link a banking or investment account, and you will begin to see your data in the dashboard. You can link multiple accounts including banking, investments, mortgages, credit cards, loans, and more. Then you will need to fill in some basic personal information, including your age, and your risk tolerance. After that, Personal Capital does the rest.
Notes about linking accounts to Personal Capital:
I only had trouble linking one account: I wasn’t able to link my Ally Invest account, as they didn’t have an automated way to link that account. But I was able to add the assets manually. Some of the other accounts required additional authentication.
For example, Capital One 360 online bank account requires a code to allow third party sources to access your account. You can find this in your Capital One 360 dashboard. Lastly, another company I bank with requires account holders to enter answers to security questions when they access the account from a new computer. I have had to submit each of the security questions when I linked the accounts. But I haven’t had any issues since then.
My Verdict – Coolest Investment Tool on the Market
I’m a self-admitted financial geek. I read and write about personal finance on a daily basis, and I try out as many tools as I can. In my opinion, this is the biggest game-changer in the financial industry since Mint.com launched. And that is high praise. As I mentioned earlier, this is a tool I am comfortable recommending to family and friends, and I think it can change how many people manage their investments. I’m all-in on Personal Capital.
Have you used Personal Capital? What are your thoughts?