Now's your chance.

Make meaningful improvements to your finances every week.

LMM's personalcapital.com review

Personal Capital Review: The Investor’s Version of Mint

Personal Capital is a free suite of tools that help track wealth and optimize investments. These tools help investors track their net worth, budget, improve investment allocations and cut 401k fees. The Retirement Planner tool is the most sophisticated, realistic retirement planning calculator available today.
Visit Personal Capital to Learn More

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. Read on for our Personal Capital review and why 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.

So what is Personal Capital?

You’re about to be impressed.

personal-capital-review-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 been 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. (Shameless plug: If you don’t know Mint yet, check out our book, Mastering Mint, and get to know this smart budgeting tool.)

While Personal Capital is a pretty important tool for every investor, it’s absolutely necessary for people who contribute to 401ks / TSPs and DIY investors.

In my 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? I’ve found that the detailed metrics available to me in my Personal Capital account help me to make very, very educated decisions. Smart decisions. Decisions that make more money.

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.

personal capital review - you index

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:

personalcapital.com review diversification screen

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 its 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.

personal capital-review diversify us large cap

The Personal Capital App is Awesome

This is a very smart, well-designed, user-friendly suite of tools. I like that I can track everything financial – assets and liabilities, and budget and portfolio – within my Personal Capital account. Plus, it turns out you can take it with you with the Personal Capital app for mobile devices. Between the online tools and the apps, you’ll never again have a good excuse for not knowing what your money is up to.

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 to navigate the next 3 years.

Cpersonal capital review retirement tooltipheck this out, it’s the first tooltip you see when you hit the retirement planner from Personal Capital. In English, this 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 Security

The bread and butter of the tool is its 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 log in 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.

Personal Capital Review - SHAencryptionThe security of your accounts is 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 10,000 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 won’t 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 security measures make 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 nearly identical.

Podcast Episode – Review and Features

Now that you’ve read our detailed PersonalCapital.com review, give this episode a listen. (Or hear it first, it works either way.) We break down a bunch of their features over an IPA. We think you’ll like it.

Show Notes

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.

Subscribe and have your financial mind blown.

Get all the things that are free and awesome, in your inbox.

It's about time you got your shit together.

2 responses to “Personal Capital Review: The Investor’s Version of Mint”

  1. Angela says:

    When a user is required to sign up to the company web site and hand over his/her account numbers, user name, password etc …it raises a major concern about security and data usage.

    I believe that perhaps private information should remain private and not stored or viewed by anyone else than the actual owner of the information.

    That is why i use Geltbox Money that eliminates the need for third party aggregation services.

    the user can aggregate his own data without exposing private data to any third parties /web site.

    This new technology enables the user to download his financial information from any financial institution in the world.

    • Angela, that’s certainly a valid concern but it shows that you do not understand how authorization tokens work (https://en.wikipedia.org/wiki/Security_token).

      Simply put, your username/password is never stored anywhere except at your bank.

      When you log in your credentials are transmitted over SSL (https://en.wikipedia.org/wiki/SSL), verified by your bank and then a token is generated unique to that site as a proxy for your password. It is unable to be used elsewhere and is worthless if stolen (they also expire).

      Statistically you should be many-fold more concerned with using an ATM or swiping your credit card than authorizing with something like Personal Capital. Moreover, they only get read-only access so nothing malicious could even be done.

      Great question but your concern is misplaced. The real question is how much do you value your time and is it worth having trivial tasks like this automated? You don’t need to use a dish washer, you can always do it by hand ;)

Leave a Reply

Your email address will not be published. Required fields are marked *