Personal Capital Review: The Investor’s Version of Mint
- Review by Andrew Fiebert
Personal Capital is like Mint but for investors. It’s a free service that allows you to track all of your investments in one place. We recommend you add it to your financial toolbox.
I remember going into a Travel Agency with my mom to plan our family vacations. We knew where we wanted to go but we didn’t know the details like what we would see on our trip, where we would stay or how we would get there. At the time the easiest way to plan a trip involved talking to an expert or consulting colorful pamphlets.
When websites like Expedia or Orbitz bust onto the scene they solved an important problem – information imbalance. The Travel Agent existed simply because they had access to information the average person didn’t and they were willing to make phone calls and book a trip for you. With all of this information at our finger tips and the automation of most of the booking process we now gladly book vacations ourselves. We also save money by cutting out the middlemen (the Travel Agent).
Personal Capital solves that very same problem for investors – information imbalance.
There are practically infinite choices for you to park your money. Vanguard’s Total Stock Market Index Fund (VTI) has over 3,700 stocks that it invests in and across the world there are over 45,000 companies listed on the stock market. Not to mention there are Bonds, REITs and a whole slew of other things you could invest in.
You’re going to be impressed.
Personal Capital is a free research and analytical tool that empowers the average investor to make the best possible decisions with their money. In a world of well-funded highly sophisticated, this tool goes a long way towards leveling the playing field.
If you’ve a fan of Listen Money Matters for even a short time, you are probably tracking your spending in Mint. But how are you tracking your investments? Personal Capital gives you that fifty foot overview which has made us such fans of Mint.
While it’s a pretty important tool for every investor, it’s absolutely necessary for people who contribute to 401ks / TSPs and DIY investors.
In this Personal Capital Review we’re going to break down all of the tool’s components and explain why they matter and how to use them. The goal is for you to be able to roll off this review and become productive immediately.
Tracking Your Returns
You might have heard this quote from Peter Drucker, “If you can’t measure it, you can’t manage it.” Peter was a famous management executive and pioneered how people are organized across corporate and government organizations.
A cornerstone of his philosophy was the importance of data and using it to drive decision making. How can you make a decision if you don’t have any information which to base it on?
Investing is no different. How can you decide to change your investing approach or stay the course if you don’t know how you’re doing? Even if you used no other feature of Personal Capital, you should use it to track your investment performance across all of your accounts.
Mint does let you track investments too but if you’ve ever used it then you’d easily dismiss it – It just sucks.
Obliterate your 401k Fees
Perhaps my favorite part about Personal Capital is their 401k Fee Analyzer. This was the first part of their service that I wrote about in depth. For the lazy, their tool basically points out in glaring read where you’re getting robbed.
Most people don’t know that only 1% in fees can eat up to 28% of your total returns over the course of a 37 year period. That’s insane. Most people complain when they have to give the federal government less than that in taxes. The biggest difference is that you get nothing in return for these high fees – except for being called a sucker.
I highly recommend you read my article but just know that it’s actually very easy to reduce your fees to almost nothing while retaining all of the value of your investments. We’ve seen as much with our Betterment Review and half the internet has documented the same thing with Vanguard.
Diversify Your Investments Properly
Give yourself a moment to take this in:
It’s one thing to say you’ve got too much or too little of something and it’s another story to see it in sexy and interactive web tool. You can click in any of those boxes and drill into your allocations to see it’s different pieces and if you’re over exposed.
Look at these sexy US Large Caps. Nothing says slow down on the Apple with a dramatic graph like this. Stubborn people like me need this.
The Personal Capital App is Awesome
A Retirement Planner You Can Trust
I’ll be honest, it’s a pain to plan for retirement. Calculating how much you need, stressing over a bunch of unknowns and generally just spending too much time with your head in the future. I’m not sure if there is any science to back this up but I’m pretty sure it’s unhealthy to think about things 30 years from now. I’m too busy trying navigating the next 3 years.
Check this out, it’s the first tooltip you see when you hit the retirement planner from Personal Capital. In English it basically means that they ran a bunch of Monti Carlo simulations to determine what’s most likely to happen to your investments over the next 30+ years.
A Discussion on Personal Capital’s Security
The bread and butter of the tool is it’s ability to provide actionable advice on your specific situation. Like Mint, Personal Capital asks you to link your accounts with the service. It will then download all of your transactions and balances in order to get a full picture of your finances.
Whenever you login to your accounts through another company, it’s important and necessary that we discuss security. You may have legitimate concerns that Personal Capital will touch your assets or even worse, that a hacker will hack them and then have access to all of your financial information.
Based on how the service was developed, this is all impossible. In order to explain things we’re going to get a bit nerdy. If you just want to jump into how the tool works you can skip to the next section.
The security of your accounts are based on a few core understandings of how you communicate with Personal Capital, how they communicate with your banks and the security around the whole process.
All of your communication with Personal Capital is encrypted – with SHA 256bit encryption to be exact. Generally speaking the time needed to crack that encryption would be 10 thousand years. Simply put, it is not cost effective or feasible to break this encryption.
This is the encryption used to send your password to the bank. During this process, Personal Capital doesn’t save your password. Once your account is validated the back sends back a token – basically proving that you successfully validated with the bank. Personal Capital saves this token, not your actual password. So, should someone be able to steal all the tokens, they wont actually be able to access your account information with that. It’s not a password and it can only be used by Personal Capital.
Ok, what if an attacker was able to navigate all of this, even if it is highly unlikely. It really wouldn’t matter because all they would get is read-only access. Basically, they’d be able to look at your account balance but they still couldn’t touch anything. Your balances are not worth much to anyone besides you.
Personal Capital’s security makes an attack so costly and impractical few will even attempt it. Then, when you consider that the access a successful attacker might gain has no value, it becomes clear that there really is nothing to worry about.
Also, on a side note, the above is the same story for Mint – the approach for gathering account information is near identical.
Podcast Episode – Review and Features
Before we jump into a detailed review, you might want to give this episode a listen. We breakdown a bunch of their features over an IPA. We think you’ll like it.
Personal Capital: Track your assets all in one place.
Betterment: The simple way to invest.
Destroy 401K Fees: Andrew’s article on avoiding killer fees.