Personal CapitalRobo Advisor Reviews

Personal Capital Review-Comprehensive Financial Management-Part 2

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t personally believe is valuable.

Everything You Need to Know About Personal Capital’s Free Investing Tools and Cash Flow Tracking

How Personal Capital Investing Tools Can Help You Build Your Net Worth and Manage Your Finances

In Part 1 of the best Personal Capital Review, we drilled down into the awesome free tools available through the Personal Capital platform as well as the seamless set up. If you’re still on the fence about whether this financial robo-advisor (or technology enhanced investing platform) is for you, get complete insight into the platform, here.

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Part 2 of the Best Personal Capital Review starts with net worth, cash flow and finishes with the Personal Capital investing tools.

Part 3 of the Best Personal Capital Review – Personal Capital Advisors – uncovers the fee structure, advisory services and investment philosophy.

Financial Management Starts With Knowing Your Complete Financial Picture

With the click of a mouse your Personal Capital dashboard is up, with your net worth listed both graphically and with a dollar amount. You can even link up your home to get the Zillow current value. The net worth graph shows how your complete financial picture has progressed over time. Notice that the day of this capture, the market had a large decline.

At this point in time, the S&P 500 fell almost 4%, yet this sample portfolio fell only 1.57%, due to its more conservative allocation.

Personal Capital investing tools + net worth overview

Here’s why you must understand your current net worth now; so you can measure and track your financial progress with top level Personal Capital investing tools. You wouldn’t attempt to lose weight without knowing how much you currently weigh, would you? Of course not. Your net worth is similar to your weight, a picture of your total financial worth at a point in time.

One of the most important financial goals is to grow your net worth over time and the Personal Capital dashboard keeps your net worth front and center. As one of the most important long term metrics for financial success – keep your net worth growing and the rest of your financial life will fall into place.

Cash Flow

Before we delve into the Cash Flow information, consider why you need to track your saving and spending.

If you want to build wealth and smooth out your earnings across your entire life, including retirement, you need a plan. And that plan starts with knowing how much money you have now, how much is coming in and what you’re spending. The Cash Flow section of the Personal Capital investing tools streamlines this segment of your life with usable resources.

On the home page dashboard, below the net worth graph is your current cash flow. Income is on the left with spending on the right.

Personal Capital investing tools-cash flow-income + spending

With color coded income and spending graphs you see immediately if your income and spending are in balance. This ‘in your face’ cash flow picture gives you ready access to the viability of your lifestyle choices. If your spending is greater than your income, you can’t hide from that information.

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The cash flow is like your day-to-day, week-to-week and short term money management compass. With the cash flow data, you’ve got the tools to see where your money is going and whether you need to make changes or not.

This image shows a positive month, with more income than spending. That’s good. If you’re having a month with more spending than income, you can’t hide from it.

Click on any section, and zoom in to see a detailed view. Click on income and see all of your income sources. Go to spending and find out exactly where your money is going.

Spending-Where Is Your Money Going?

I’ve tracked my finances for decades. First, with a now defunct money software program by money maven Andrew Tobias and now with the Quicken platform. Although Quicken is great, I’ve found that adding the Personal Capital investing and money management tools to my financial arsenal is a good move.

I remember the first time I noticed how much our family was spending on dining out, it was a real eye-opener. It caused us to sit down and figure out if the money we spent at the restaurants was worth the damper it was placing on our financial growth.

The Cash Flow account dashboard allows you to drill down to the penny how much you spent with your checking, saving and credit card accounts. There’s nowhere to hide your spending from yourself.

Personal Capital cash flow-Where is your money going?

Interested in analyzing your spending more? Categorize each purchase by date, merchant and category.

Keep on Top of Your Bills with Personal Capital

With all the time demands, it’s tough to stay on top of bills due dates and when you made your last payment. Personal Capital shows you when bills are due, the minimum payment along with total amount outstanding.

Income-The Important Flip Side of Spending

The income screen breaks out where your money is coming from. The bar allows you to compare your monthly income with the average. You can also adjust the view to highlight a variety of time periods. By analyzing your income, you can assess your incomes sources and use that data to consider how to improve your income profile.

Cash Flow Chart - Income section of Personal Capital Investing tools
So far, we’ve talked about the cash flow and net worth capabilities of Personal Capital. But the beauty of the platform is that it seamlessly integrates your short-term income and expenses with a comprehensive investing platform. This holistic financial view is priceless, and so far, everything we’ve covered is free.

Now, let’s investigate the free investment tools.

Free Personal Capital Investing Tools Platform

Being able to see all of your investment accounts, from all sources is ideal. After inputting all of your information, you have a 360o view of all of your retirement, bank, and brokerage accounts. You can integrate that CD you have with a credit union with your prior 401(k) account, a Roth IRA, discount brokerage account and any other type of account you have. This allows you to slice and dice individual cash, stock, bond, mutual fund, ETF and any other financial holdings into a total picture.

So now that you have all the accounts and investments in the system, here’s what you can you do with the Personal Capital investing tools:

  • Investment Check Up:

1.Past and Future Portfolio Performance Information

2. Asset Allocation Analysis

3. Risk and Return Analysis

  • Retirement Planning Calculator
  • Portfolio Fee Analyzer
  • Tax Loss Harvesting

Investment Check Up

The investment check-up offers priceless tools. The overriding question that the investment check-up answers is “Could your portfolio give you greater returns for a reasonable risk level?” The program answers this question by comparing your current asset allocation to the recommended target. All results are driven by how to explain your personal risk tolerance from highest safety (most conservative) to highest growth (riskiest).

Target Asset Allocation

Based on the users risk preferences and expected retirement date Personal Capital creates an asset allocation for the user. This portfolio leans towards the aggressive side.

Personal Capital target asset allocation

 

When comparing the current allocation with the suggested target, you can see that there’s lots more cash in this portfolio, than recommended as well as fewer international stocks and bonds than recommended.

Risk v. Return

In the next graph from the Personal Capital investment tools section you can see the interaction between risk and return of the sample portfolio versus the targeted.

Personal Capital-Modern Portfolio Theory + The Efficient Frontier

 

The curve or efficient frontier represents the interaction between the portfolio’s risk and return with any portfolio which lies on the line representing the greatest return level for the amount of risk desired. If you compare the current allocation with the target, you’ll see that the current portfolios expected return is 8.0% with a risk level of 12.7%. If this user switched to the recommended allocation they may benefit from a higher return of 8.9% and a risk level of 13.5%.

When the program analyzed my family’s actual portfolio they found it to be too conservative.  According to Personal Capital, if we switched to the target allocation then we would gain greater portfolio returns and more money in retirement.

Here’s another comparison, using the Personal Capital investment tools,  of an actual asset allocation versus the Personal Capital targeted portfolio:

Personal Capital Investment Tools Guides the Rebalancing Process

 

This graph points out that the actual stock allocation is close to the target whereas the cash allocation is much higher than the target. Take a look at the US bond comparison which suggests this portfolio needs to increase its U.S. bond holdings.

I really appreciated the FAQ at the end of the check-up. The list of questions and answers is great if you have any lingering concerns about how Personal Capital comes up with its results.

The company explains that “The Investment Checkup is limited to the data you have aggregated and the profile information you have entered.” In other words, the analysis is only as good as the inputs. It also doesn’t include fees or expenses.

Retirement Planner

Are you wondering if you’re on the correct trajectory to meet your retirement goals? The retirement planner gives you the answer.

The calculator tells you best and worst case retirement scenarios. It shows how much monthly spending your current portfolio will allow throughout retirement. If you’re out of whack and your spending is projected to surpass your income, you’ve got time and tools to adjust.

 

Personal Capital Retirement Analyzer

This is a sample image of a family that’s done its retirement planning correctly. The consumer desires $7,500 per month spending yet has the ability to spend more, without running out of money.

Retirement Fee Analyzer

This calculator allows you to investigate the bite that fees consume from your total returns. Even the lowest account fees can add up over time. This was true in the estimate below. Although this portfolio had a rock bottom expense percentage of 0.14% as compared to the benchmark portfolio fees of 0.50%, over the upcoming 10 years until retirement the portfolio will ultimately lose 3.0% to fees.

Notice that below the graph you can also manipulate your portfolio assumptions.

retirement fee analyzer-personal capital

Pros and Cons of Cash Flow, Investing, and Analysis Tools

Pros

The data overview and integration is phenomenal. It’s helpful to view net worth, income, expenses, and investments with the push of a button.

The retirement analyzer is a superb tool, as is the retirement fee analyzer.

The drill down into sectors and detailed aspects of your portfolio is similar to the Morningstar x-ray tool and is a great way to uncover holes in your diversification strategy.

The You IndexTM allows the user to compare your own investments against various benchmarks. For example, after a bit market drop in August, 2015 when the S&P fell -3.19%, my portfolio only dropped -1.9%, due to its conservative allocation.

Set up is very simple as we discussed in part 1.

Excellent, bank-level security.

Good mobile and tablet access.

Cons

All assumptions are based upon past data. There is no guarantee that the past performance of any asset classes will continue into the future. In my opinion, although the U.S. stock market performance has hovered around 9% for the last 85 years there’s no assurance this equity out-performance will continue, especially with slowing U.S. economic growth.

Their assumptions are a bit aggressive for my taste, even for the moderate portfolio. The investment check-up, using historical assumptions doesn’t jive with my personal preference of capital preservation over growth. Maybe if I indicated a desire for a more conservative portfolio, then my results would have been more in line with my current preferences.

The account panel on the left couldn’t be completely minimized for a larger screen view of the data and analysis information.

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Personal Capital Review of Investment Tools Summary

Sign up for the free Personal Capital account. The tools are outstanding and there’s no disadvantage to signing up for these Personal Capital money and investing tools.

>>Read: Personal Capital Review – Why You Must Sign Up for Personal Capital – Part 1-for an overview and drill down into the easy set up. Learn about the model from Bill Harris, the founder.

>>>Read: Personal Capital Review-Comprehensive Financial Management-Part 2 – to find out everything you need to know about Personal Capital cash flow and investing tools.

>>>Read: Best Personal Capital Review – Personal Capital Advisors – Part 3 – to uncover the fee structure, advisory services and investment philosophy.

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Personal Capital Review - Personal Capital Advisors - Part 3

Barbara A. Friedberg, MBA, MS

Barbara A. Friedberg, MBA, MS

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