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Hopefully you have viewed my previous post on Personal Capital and, if you were not already a user, clicked on my banner and created an account (and if not, I hope you finally take the plunge after seeing all the benefits Personal Capital provides at your fingertips).
The mission of this post is to maximize the usefulness of this amazing and robust tool.
I truly feel that this free Personal Capital service will be the most powerful tool you have in your arsenal that will provide data that can best help you on your way down the path to financial freedom.
Linking Your Accounts:
The very first step you should do is link every financial account you can think of to the personal capital website.
Accounts to consider adding:
- Checking accounts
- Savings accounts
- Employer 401k
- Traditional or SEP IRA
- Roth IRA
- Health Savings Account (HSA)
- Taxable Brokerage Accounts
- Pension Accounts
- Certificate of Deposits (CDs)
It is a relatively painless step and once this information is entered it will be stored safely as discussed in my previous post.
To link each account you first find the “+” sign typically found in the top left hand corner.
You type the name of your financial institution and select it from the list it generates (there are some institutions that are not in the Personal Capital list that unfortunately require either manual entry or complete exclusion in the subsequent calculations (and you have to manually add this to your net worth figures).
Once all your financial institutions, assets, and debts are entered, you are immediately presented with your Net Worth.
You can find this by clicking on the Dashboard (which is a dropdown menu under the Overview tab).
Just this information alone would be worth joining Personal Capital (as it takes the tedious work of getting current values of your assets from all entered sources and subtracting all debts without you having to individually log into each database).
You can update this information as often as you like and track your net worth daily if so inclined (I am guilty of doing this).
With time you will see your net worth progress tracking with a graphical display (it’s always pleasing to see an overall upward slope to this confirming what efforts you are doing are working on your path to financial independence)
However, you would be doing yourself a huge disservice if your interaction with Personal Capital stops here.
In the same dashboard, below the net worth area there is a section called Portfolio Balance.
This is useful information as it solely displays what your investable assets (it will group retirement and taxable accounts together) are doing in isolation to other financial events.
- Certain scenarios can occur where your investments are performing well but your net worth still may take a large hit due to an unexpected financial expense that crops up (for me the timing of my home/auto/umbrella insurance policy renewals and owing taxes to the IRS happen to make April an expensive month that may see a decline in total net worth but my investment portfolio can still be trending up)
You can click on Portfolio Balance directly which brings up a more detailed analysis which gives you the option to track individual accounts if you so desire (can see specifically how retirement versus taxable accounts are doing separate from each other).
Powerful Rebalancing Tool:
Now we are starting to get into features that would be monumentally time consuming if you had to do it by hand but that are essential if you want to properly rebalance your portfolio and keep your desired asset allocation.
I take advantage of this by clicking on Allocation from the dropdown menu under the Investing Tab.
Doing this brings up a visual and numerical summary of all the investments you have initially entered by default.
(If you want to do individual analysis of a specific account, that is simple too, just uncheck the “all accounts setting” and individually select the account you want analyzed).
Personal Capital will then break down your portfolio into 6 asset classes for you (Cash, International Bonds, US Bonds, International Stocks, US Stocks, and Alternative) with both a percentage of total portfolio and a cash value.
Therefore if one or more of these asset classes are significantly deviating from your desired asset allocation, you can rebalance them back in line by either directing new money into the lagging asset class or classes (this is the method I favor), or selling the overweighted asset class and using proceeds to buy the underweighted asset class (which is following the basic investing tenet of sell high, buy low).
If you do employ the second method of rebalancing, be wary of potential taxable events or transactional costs that it may trigger (which is why I prefer the first method).
If you end up choosing the second method of rebalancing, it is preferable to do it in your tax deferred/retirement accounts as this will shield you from capital gains taxes (if any) that would occur in a taxable brokerage account.
This tool analyzes your portfolio to determine it’s investing efficiency and whether you are exposing yourself to uncompensated risk.
Using the dropdown menu from the Planning Tab select Investment Checkup.
I suggest scrolling down until you see the section “What Is Target Allocation?”
In this section there is a slider where you can pick your risk tolerance/investing style from most conservative all the way to most aggressive (the Growth setting best matches my personal risk profile)
Continue to scroll down until you find a graph representing the Efficient Frontier under the Risk and Return section.
There will be two points on the graph, your current allocation and target allocation (may overlie each other).
You want your current allocation to be as close as possible to the dark curved line, the “efficient frontier.”
This line represents what is thought of as the ideal return/yield for a given level of risk.
If you are below this line then you are taking undue risk for a given return (or not getting enough return for a given level of risk)
Retirement Fee Analyzer:
This is another tool that is quite beneficial and allows you identify excessive costs that could potentially erode your nest egg.
Using the dropdown menu from the Planning Tab select Retirement Fee Analyzer.
Personal Capital then provides a great list of individual holdings and their associated expense ratios and actual annual cost (click on the All Accounts drop down in this section and confirm all your accounts are checked as it is not often the case by default).
If you have followed my advice from my Asset Primer series, you have already minimized this expense ratio by primarily investing in index funds (passive) rather than their more expensive actively managed counterparts.
Personal Capital has a benchmark target of 0.50% expense ratio (50 basis points).
For me personally all my accounts have a blended average expense ratio of 0.07% (7 basis points).
Even though these numbers are deceivingly small, a small difference in an expense ratio can have a huge impact on your bottom line.
The lower your expense ratio is, the more money you retain to continue working for you and the bigger your nest egg will grow.
And lastly, the fun stuff.
Under the drop down menu for Planning select Retirement Planner.
Personal Capital has a feature that attempts to forecast your net worth based on current asset values and factors in variable inputs you assign regarding amount of annual savings, retirement age, desired spending in retirement, etc. using a Monte Carlo analysis
Can’t make up your mind?
You can create and compare multiple scenarios (I have several with different combinations of retirement age and desired spending).
It will give a graphical representation of your net worth in time using a median historical market performance with your particular asset allocation as well as how your portfolio would perform in a historically poor 10th percentile market return.
It will then breakdown what your desired monthly spending is and compare it to what your portfolio should be able to handle.
It also gives you a descriptive rating if you are on target on not.
Obviously this is not meant to be a 100% accurate prediction, but it gives you an idea of how far along you are on your path to financial freedom.
So if you are not one of the countless individuals using Personal Capital already, please do me a favor and click on my Personal Capital banner link (full disclosure I do get compensated for accounts created using my ad) and join.
As a bonus, if you do an email subscription to my blog, I will send you an email giving you a pass to my Fortress of Solitude where I keep a secret hidden blog page (giving you access to an Excel Net Worth Spreadsheet template I created and use (along with Personal Capital) to monitor my asset allocation.
It even has a nifty feature that tells me how much to buy or sell of each particular asset allocation when rebalancing is needed.
So please consider subscribing and get this bonus material that I feel will really help you monitor your net worth and make significant strides down the path to financial independence.
NOTE: The website XRAYVSN contains affiliate links and thus receives compensation whenever a purchase through these links is made (at no further cost to you). As an Amazon Associate I earn from qualifying purchases. Although these proceeds help keep this site going they do not have any bearing on the reviews of any products I endorse which are from my own honest experiences. Thank you- XRAYVSN
I really enjoy using Personal Capital! Thanks for the post Xray. I find it awesome to head to their different graphs to see where I’ve allocated money and how different investments are doing!
Thanks Chris for the comment. Yes Personal Capital is quite a powerful tool and I know a lot of people haven’t unlocked all the cool features available (I know I haven’t) but this is basically the stuff I found (it is amazingly helpful in my attempts to rebalance my portfolio). Glad you found some use of this post.
I signed up for personal capital about 2 years ago, found the experience clunky and not too dissimilar to Mint, and then let it go. I still get phone calls and emails from them asking if I would like to do the intro consultation – and all that just turned me off. HOWEVER- I also had not taken the time to explore the platform and I had no idea that all of these features are available. Thanks for your post! I may go for round 2…
Thanks Mike for the comment. Yeah I sort of tune out the solicitations by personal capital and give them some leeway because obviously they are a business and they have provided this service tool for free. Those annoyances are small compared to the time savings I get for not doing this manually
Alright… I’ll go for a round 2 and give this an honest shot. Thanks again.
I like personal capitol, but it has trouble with a few of the institutions that I use. None of them are small entities, but this has been going on for years. Sad, as I would really like to get it all in. Fortunately, my primary bank has the basic tools.
I think PC did not recognize one of my institutions. You can actually submit a request to have it added (but so far it hasn’t been acted on so not holding my breath). I use the spreadsheet I created on Excel (I give a free template to those who subscribe by email to my blog) that helps fill in the gaps.
I remember signing up for the first time about 2yrs ago and seeing a net worth of over negatibe $250,000. Impressive, I know. Student loans will do that to you.
I’ve had a great relationship with the software since then. Seeing my networth climb, using the tools you describe and maybe to compulsively checking each day. It’s all been fun with the market going up. I’ll probably have to take it off my phone during the next downturn.
LOL. I hear you on the daily monitoring. It is nice when it goes up, probably not so much when a bear market hits. Student loans definitely was a heavy burden I had to bear for the longest time (almost 22 yrs), once that got taken care of (and mortgage) it is impressive how quickly your net worth can grow. Best of luck in growing your net worth!
It is a nice free service they offer. I have an account under their management also. They have a unique investing strategy which is far different from Vanguard who also has some of my money. I think there is value in the diversity this provides me but am not sure if the 0.79% fee Personal Capital charges is justified or not. I’m waiting to see how each account weathers the next big market downturn. I have a third account at Betterment so I’m kind of waiting and watching to see how each does.
That definitely is a great way to hedge your bets. Would love to hear a post on your long term results especially (like you said) after a market downturn. Thanks for stopping by and appreciate the comment!
I’m a huge fan of Personal Capital. I had no idea you can add your pension. I’m going to try to add it!
It depends on the institution (sometimes Personal Capital does not have a particular institution to link (you can actually make a request to add it but it is hit or miss).
I was also interested in this question. I’ll try to add too. Thanks to the author!
I use a similar financial account management tool available through Betterment. My only frustrations so far have been some accounts not able to be synched to my external account lists (Personal Capital has the same issue it seems) and updates not being immediately available upon log in for some. I can’t manually refresh them either through the app whereas I can from the desktop site. It seems like Personal Capital is a useful tool for tracking your net worth and managing your finances. I don’t know if I’ll make the switch from Betterment because of the duplication of services. But… Read more »
Thanks for stopping by and commenting. Have not used Betterment but have heard good things about it too. Luckily all my accounts except one link up to Personal Capital (and I manually add the other one). These tools really make managing your portfolio a lot easier than it used to be. Have a great one!
Great post. I use proprietary software as my main analytic tool kit for my portfolio but I use Personal Capital as well. For the average guy it is incredibly powerful and the price is right. I use Mint as a budgeting aggregator and offload each months data into a custom spreadsheet. All of these make understanding a complicated portfolio easy and saves a ton of labor.
Exactly. The key is to make it easy for the regular person to use it otherwise it will never be done. I rarely evaluated net worth in the past before Personal Capital because it was a lot of manual work.
You are the best. Thanks
Thanks for the kind words Aneesh. There are a lot of features that I had to discover on my own and thought I would share to help others