After five years of using Personal Capital’s free financial tools to track my net worth, manage my cash flow, and optimize my investments, let me share with you the most thorough and honest review about their free financial application. From 2013 – 2015, I was also a consultant for the firm and therefore have intimate knowledge of their people, their technology, and their product.
It’s my belief that Personal Capital is hands down the best free financial tools you can find online to help manage your finances and achieve a more secure retirement. I’ve tried everything from Excel, to Mint, a plethora of other financial apps, and nothing comes close to Personal Capital’s tools.
With Personal Capital, you can do the following things for free:
- Automatically track your net worth
- Analyze your investment portfolios for excessive fees
- Analyze your investment portfolios for proper asset allocation
- Track and manage your income and expenses
- Run various retirement planning calculations to ensure a better financial future
Personal Capital currently manages over $3 billion in managed client assets as of 4Q2016 and they track over $200 billion in assets for free. This amount is a testament to their money management capabilities and product offerings. Their competitive advantage is that they built their company from the ground up with technology at its core. As a result, they are much more flexible in tailoring offerings to meet consumer demand.
Further, Personal Capital announced they had raised $75M in Series E funding by IGM Financial in Canada in 2016, raising a total of over $175M in funding. Clearly, Personal Capital is here to stay for the long term.
EIGHT GREAT REASONS TO USE PERSONAL CAPITAL
1) Simplicity And Less Stress. Before Personal Capital, I had to log into eight different financial institutions to track over 30 different financial accounts ranging from brokerage accounts, money market accounts, CD accounts, checking accounts, IRA, and my 401K. My finances were a mess, and I’m sure your finances could use some organization as well. Now I can just log into Personal Capital to see how everything is doing in one place. It’s important to have a holistic view of your overall financial health so you know where to allocate resources.
2) Net Worth Overview. Gone are the days where you have to use an Excel spreadsheet to manually update every single asset and liability line item to calculate your net worth. Personal Capital updates your net worth automatically as soon as you log in because all your accounts are linked. They provide a pie chart of your assets as well as gives you a historical chart of your net worth progression. If you cannot find an account in their database, you can simply add it yourself. Personal Capital will also conveniently e-mail you a weekly snap shot of your latest net worth along with how the markets did, upcoming bills, latest insightful blog posts and accounts that need your attention. Below is a sample headline snapshot.
3) Tracks Your Cash Flow. Budgeting is personal finance 101. By tracking your income and your spending like a hawk, you will be able to save a lot more money than if you simply tried to guess everything. Think about all the times you withdrew cash from the ATM machine and had no idea where all the money went a couple days later. Aggregating all your accounts allows you to see where all your money is going. In the example above, this entrepreneur brought in over $38,000 in income and spent only $3,096. Now that’s great cash flow!
4) Helps You Balance Risk. With so many accounts, it’s often hard to see exactly what’s going where. For example, so many people were too overweight stocks before the financial crash in 2009. With Personal Capital, you can easily see where the imbalances are in your net worth so you can make smart adjustments. Now that it’s a bull market, investors are probably too overweight equities and way underweight bonds once again. The Investment Checkup tool analyzes your portfolio’s holdings based on size, style, and sector. Personal Capital excels for those who have assets in the stock market. Personally, I like to maintain a 35%, 35%, 30% split between stocks, real estate, and CDs/bonds.
5) Helps Reduce Fees. One of my favorite tools Personal Capital provides is their Portfolio Fee Analyzer. I ran my 401K through their fee analyzer and discovered that I am paying over $1,750 a year in management fees. I had no idea that my Fidelity Large Cap Growth fund cost $1,200 a year due to a 0.74% expense ratio compared to sub 0.3% for my Vanguard Funds. As a result, I found a similar Large Cap index fund instead and am now saving $1,000 a year. Without Personal Capital, I would have spent over $87,000 in excessive fees over the next 20 years. Take a look at my example below. Portfolio fees are a serious problem which will rob you of your retirement wealth if you are not careful. Don’t let ignorance rob you of your financial well being.
6) Shows Your Portfolio’s Investment Efficiency. Based on your risk tolerance and investment objectives questionnaire, Personal Capital will give you an idea of where your current allocation is on the Efficient Frontier Curve. The Efficient Frontier Curve is the best returns for a certain level of risk. You want to be on the curve and not above or below.
7) Recommends Specific Dollar Amounts To Invest. Financial advice is useless if there is no actionable advice. Personal Capital will recommend the specific dollar amounts to invest or reinvest in each asset class to get you to an optimal asset allocation. In this example below, the investor is too heavily weighted in cash. In order to get to his recommended target allocation the investor needs to increase stock holdings by roughly $200,000 and bond holdings by roughly $100,000. The fun part is figuring out which index funds to invest in each category. All investment related charts and analysis can be found in the Investing tab.
8) The Best Retirement Planning Calculator Today. The award winning product team came up with what I think is the best retirement calculator on the market because it uses real data and Monte Carlo simulations to come up with the most realistic financial scenarios for your future. Other calculators simply ask you to guess input values to then come up with your financial future. The problem with this method is that we often underestimate how much we are saving and spending! You can input different life events such as a wedding or home purchase in your cash flow statement and recalculate your financial future to see how you’ll do. Everybody should give it a try.
OTHER GREAT FEATURES
Award Winning Technology – Lauded by MacWorld as the Best Financial app on the web.
Easy To Use – All you’ve got to do is sign up, press the “+” to link all your desired accounts, fill in the respective user names and passwords and everything will get downloaded on the Personal Capital dashboard. The more accounts you link, the more comprehensive picture you will receive of your finances. It only takes a couple minutes to sign up.
E-mail updates – Every week you’ll get an e-mail update of your net worth, the latest Personal Capital news, and a snapshot of the markets. You can also subscribe to Daily Capital, the Personal Capital blog to gain insights.
Tax Loss Harvesting – Personal Capital practices tax loss harvesting and tax location for their clients. Tax loss harvesting alone gains up to 1% in after tax return a year.
Smart Indexing – Smart Indexing aka Tactical Weighting is the practice of investing in equal weighted sectors or styles. In bull markets, one sector can grow to an outsized percentage, such as during the dot com bubble or the financial bubble. When the market corrected, people lost a lot of money. But if they practiced Smart Indexing, by constantly staying disciplined with equal weightings in the sectors, they would have outperformed.
LEVERAGE TECHNOLOGY FOR FREE
When you know where your money is going and where it’s being invested, you gain a tremendous amount of confidence in your financial well being. One of my biggest goals on Financial Samurai is to help everyone achieve financial independence sooner, rather than later. You may not be wealthy now, but just knowing you’ve got your finances in order and have a financial plan tremendously increases your chances of financial success.
Once you are financially secure, you free to do whatever you truly want. Get a handle on your finances by signing up with Personal Capital for free and aggregating all your accounts. The financial management tools are free and takes less than a minute to sign up. I spent the past 13 years meticulously tracking my own finances to achieve financial freedom. If I discovered Personal Capital earlier, I think I would have reached freedom even sooner!
Here’s a short video from Bill Harris, CEO about his vision and purpose for creating Personal Capital.
About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies, and writing online to help others achieve financial freedom sooner, rather than later. With over 1 million organic pageviews a moth, FinancialSamurai.com is one of the largest and most trusted personal finance sites on the web since 2009.
Updated for 2017 and beyond.