A Tool to Help Monitor Your Investments
If you are like me, after years of working and saving money, you have several retirement related accounts spread around different financial institutions. In this post I will introduce you to a free online software tool that can help make monitoring your investments much easier.
I learned about this online tool from a friend about a year ago. I tried the software out and it does work pretty well. The main benefit of the online tool is that it allows you to view all your accounts from different financial institutions in one place. This makes monitoring your debts and investments in a holistic manner much easier. This free software tool is provided by the web site www.personalcapital.com.
The Personal Capital web site provides a way for you to link, via your individual financial institution’s account ID and passwords, all your financial accounts to their platform to create what they call a “Financial Dashboard.” These accounts do not have to be just retirement accounts; they can be home mortgage accounts, credit card accounts, checking/savings accounts, etc.
Before using a tool like this it is best to try to combine all your accounts into as few financial institutions as possible. For example, my wife and I have combined most of our qualified retirement accounts, but because of the way we manage our retirement funds, this still requires we use many different accounts at several financial institutions.
My wife and I keep all our Traditional and Roth IRAs with T. Rowe Price. I still have a 401(k) with my last employer that I have not closed because it has a cash fund that still has a relatively high yield. We keep most of our fixed income ladder at a credit union because of their higher CD rates (the balance is in our IRA/401(k) accounts).
We have an account at www.folioinvesting.com where we manage our individual stock investments outside of our retirement accounts. We keep this account because, for a $290 annual fee, we can buy and sell stocks commission-free. We also have a couple of money market accounts at Ally Bank where we keep our emergency funds. Our Ally Bank money market accounts pay a small current yield of 0.84%, but they allow us to write up to six checks against these accounts each month if necessary. All these accounts have been loaded into our Personal Capital web site account and I can monitor them all in one place.
The best feature is, with one click, the tool provides our total retirement assets from all accounts broken down into their respective major asset classes and aggregated into one color-coded chart including dollar amounts and percentages. This makes monitoring our overall asset allocation weightings very easy. However, any portfolio changes must be made within the appropriate financial institution’s web site.
The financial dashboard has access to all the account detail for each mutual fund and Exchange-Traded Fund (ETF) that you own. One of the features I particularly like is the software uses the fund information available to calculate the expenses that each of your funds is charging you based on the expense ratio of the fund. I used to spend about an hour every six months calculating all our fund expenses. Now, with all our accounts loaded into Personal Capital, with one click, I instantly know the total dollar amount we are paying in fund expenses.
I can compare this total fund cost information to the total value of all our funds and I know our overall average retirement account expense ratio. In our case, our average fund expense ratio is 0.45%. However, when I add all our other retirement related assets such as Bank CDs, money market accounts, and our individual stock portfolio to our fund totals, our total expense ratio drops to 0.15%. To be fair, since I do all my own investment management, I should include the cost of all the investor newsletters I subscribe to. Adding these subscription costs to our fund costs makes our overall expense ratio about 0.27%.
If your average expense ratio for just your funds is over 0.5%, I would look for ways to reduce this percentage. The higher this ratio, the more it eats into your investment returns over time.
Personal Capital makes money through fee-based investment advisory services. But you are not required to use their paid services to set up and use their online financial dashboard tool. As you would expect, when I first set up my personal capital dashboard, an advisor contacted me a couple times to see if I needed to use their services. I politely declined and they have not bothered me since.
Like every other software application, it takes some time to set it up (it took me about 2 hours to figure out their software and link all my accounts), but it will make monitoring your financial life easier from that point forward. For those of you that have retirement accounts, or for that matter any financial accounts, spread around several financial institutions, you should consider using the free Personal Capital online tool.
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