Did you ever track all your finances on paper or excel? I did, until a couple of years ago when I started to use Mint.com. I welcomed the switch as manually entering in all the data had become tedious. Mint aggregated all of my account information into an easy to read snapshot of my financial health. I loved everything about it and couldn’t imagine using something else. But, then I stumbled upon Personal Capital…
Before joining Personal Capital, I had heard great things about it but thought there is no need to switch from Mint. I was reluctant to have two websites aggregating my financial data but finally, since I was asked so often about it, took the plunge. It took me a couple of weeks to get use to the interface, but I quickly preferred Personal Capital to Mint.
The main reason I prefer Personal Capital is due to its investment sections. It has multiple features that I found extremely useful in giving a complete picture of your investment health, which is my area of interest. As great as Mint is with aggregating budget information, my desire to see the financial health of my investments outweighed it.
One of the the first features on Personal Capital that I fell in love with was under the Portfolio Section called “Holdings”. I am able to quickly look at what my portfolio has returned by month, quarter, semi-annual, year-to-date and even last year’s return. This is benchmarked against the S&P 500 to give me a quick idea of how my portfolio is doing comparatively.
Within the “Holdings” section, you can also break out your performance by account. Therefore, you can isolate how your 401(k) or your brokerage account is doing versus the S&P 500 to give you an idea if you need to make any changes based on the data. One thing to note, if you work for the U.S. Government and have a Thrift Savings Plan they do not provide up to date information performance information. I am not sure why. This is one of the biggest downsides to using Personal Capital, but given the other features available, I have been able to overlook this.
“401(k) Fee Analyzer”
Despite its name, it is actually a ETF and mutual fund analyzer. It has the ability to review the amount that you pay in fees, based on the expense ratio for each ETF and mutual fund in your 401k and other investment accounts. This feature should frighten the mutual fund companies as you can quickly see how much you are paying in fees. There is even a graph that shows how much in total fees that you pay over a lifetime. This is eye opening, as you will see fees add up from tens to hundreds of thousands of dollars over a lifetime.
This allows you to look at your current investment allocation and compare it to a target allocation that ranges from conservative to aggressive. Depending on your risk appetite, you can play around to see if you are currently invested for your risk tolerance. In accordance with your tolerance, the website provides feedback on where you should potentially reallocate your investments in order to meet your targeted allocation. The really nice thing is that most target asset allocations only provide the percentage that you should target.
Personal Capital provides you with the exact dollar amount needed to reach the ideal target allocation. It also provides data from 1992 to present to show historically how your portfolio would have performed. I find this to be great feedback, whether interesting or scary. Please note, while historical data is not representational for future performance, it does provides a data point for you to reference.
This is, by far, my favorite feature. This feature allows you to input financial data to see if your projected portfolio value will allow you to retire at your projected retirement age. You have the ability to include social security, a pension (if you’re eligible for one), and any other future income streams that you may receive in the future. You then can compare your future investment income against how much you would like to spend in retirement.
Most experts tout that you need to have 70% of your work income in retirement. This is a false narrative. You need 100% of your retirement spending in retirement. If you plan to jet set around the world after you retire, you may need more than 70% of your work income in retirement. Likewise, if you plan to retire to a beach and spend time with the family, you may only need 30%. Only you will know what the right spending outcome for you is, but make sure you figure out how much you want to actually spend in retirement to get a good picture of your financial health.
As you can see, the investment section of Personal Capital is extensive, and this is the main reason that I encourage my friends, and now you, to sign up. The best part is it is free, and it provides key data that shows you how you are truly doing. This might be a splash of cold water for some people or a confirmation for others that they are on the right track.
Are you going to reach your retirement goals? Did Personal Capital affirm your position or have you made any changes based on your feedback?