Personal Capital Investing Strategy

[Happyras]

I recently trialed Personal Capital as an alternative for consolidated views of our financial data, and I find it quite good. Thanks to the poster that led me there.

I have not bought into their advisory services, but I am curious if anyone has experience using their advisory services, or approach on their own. Their pitch proclaims that their method of sector re balancing has proven improved performance with lower risk than a straight S&P Indexed investment either ETF or Funds. They limit duration and maturity on the bond side to <5 years. Obviously at the cost of yield, but for a reduced interest rate risk.

Their data is compelling, leading to whether one should pay them their fee for maintaining the investments (re-balancing quite often to maintain a 10% per sector allocation), or consider trying to do so oneself.

Their advantage is in buying a large cross section of individual stocks and ETFs for small and foreign, rather than M funds, and managing the allocation to a type of index model in line with MPT.

First of all, it sounds more like they are acting as a mutual fund with an expense ratio of something like 0.8%, or similar to some account managers I have had in the past. They claim their approach is not stock picking, but using individual stocks, <200 seams to be more at risk than buying the S&P index but still enough to spread risk. Yet, their reduction in weighting on key sectors, and maintenance of allocation evenly across all sectors is their way of reducing market correlation risks. Example, my Health Care allocation is >17%, they would manage it to 10%, same with Tech and Financials, managed to 10% of US equity exposure. In the other view, they would increase small and mid cap allocations well beyond the overall market weighting within those sectors.

Does anyone have experience to support their data, net of fee, that they beat the S&P with a lower Std Deviation etc.? Its a bold statement that they support with data from 1990 on.

My current allocation is lagging due to the bond side duration, and I do not see this improving holding VWIAX and VWENX for a majority of my bond allocation. With a basic 60/40 split, my YTD is only 52% of the S&P due to the pull down in bonds.

 

[LOL!]

Their ideas are nothing more than a typical small-cap and value-titled slice-and-dice portfolio asset allocation used by many people on their own. I would not pay their fee to do that because it is trivial to do-it-yourself AND keep the expense ratios of the ETFs and/or funds you use to under 0.15%.

The S&P500 index is not a good benchmark and can be easy to outperform over the long term if one uses riskier equities such as small-caps and value ones.

 

[Happyras]

Their ideas are nothing more than a typical small-cap and value-titled slice-and-dice portfolio asset allocation used by many people on their own.

I see your point, but the equal weighting of the 10 sectors while over-weighting the small and mid caps seems to require some stock picking rather than using indexed funds. Looking for some thoughts how to select the stocks and or funds to do this without their selection method. I assume they have a bit more of a computer algorithm than most. But that is why I asked the question, maybe its not that hard to do on your own and how do folks select the funds for the allocation strategy.

 

[braumeister]

If the idea appeals to you, also check out their competitors, such as Betterment, Scwhab Intelligent Portfolio, Wealthfront, SigFig, and several others.

As LOL! mentioned, they apparently beat the S&P 500 by a bit, some of which is eaten up by their fees, but the 500 may not be the best benchmark for you to use.

But there are quite a few of these "Smart Indexing" or "Smart Beta" outfits, with more appearing every month. Look into all of them.

 

[nash031]

I have done everything in my power to avoid my advisor's phone calls. I've been successful in never speaking to this person in the more than three years I've used PC.


If you believe all their allocation data, or track it on the side via Excel as I do, PC is a powerful tool to help self-manage your various accounts across institutional lines. But I don't view it as anything more than that.

 

[Ready]

Anyone can beat the index for a short period of time. Their financial advisors don't have any additional knowledge on how to do this than any other investment firm out there peddling financial advice. Every study I have read confirms that keeping your expense ratios to a minimum through index funds will always beat a financial advisor's strategy over a long period of time, after adjusting for fees and being equal regarding risk.

I intentionally gave them the wrong phone number when I signed up to avoid the sales calls. I like their software just for getting a snapshot of our finances, but otherwise I see no need for their advice.

 

[Hyperborea]

It sounds to me like this is similar to the idea of equal weighting all stocks rather than equity cap weighting. Equal weighting is difficult to do because of the large amount of trading needed to keep the stocks balanced that leads to lots of fees and taxes. Cap weighting means that everything stays balanced as the prices of the stocks change without any action on the part of the fund. This is somewhat of an approximation of equal weighting by only rebalancing with 10 segments rather than 500.

Essentially, this model and equal weighted indexes do better than cap weighted because they have a higher percentage in the small segment of the market which has higher returns but also higher volatility. You could, as has been mentioned, do something similar by holding some %age in total market or S&P500 and another %age (10 -30) in small cap and then rebalance yearly. Probably be cheaper and just about as good.

 

[capjak]

I also like PC for the consolidation view and spending (Credit Cards/Bank etc..) of my accounts but have avoided any advisor calls. 0.8% seems high to me.

 

[Another Reader]

Hmmmm...they don't call me. Must be the the very high percentage of net worth and income tied up in rental properties...nothing to sell me.

 

[BeachOrCity]

I have used their asset management services for a small percent of my NW to see how they do.

Bottom line is I do think their service is fairly priced. They agreed to only use the us equities for all the cash I gave them and yes it has outperformed s&p by a small amount. You need to keep in mind that the trading costs are free in their model w equities only.

I don't think there are many shops of comparable size that will do what they do for an squivqlent fee. Betterment and wealth front appear to charge less but all they do is balance among mutual funds or etfs. PC actually uses stocks.

Net net after about 2-3 years with them I think I am more likely than not to give them more assets to manage but not all of it.

 

[CaliKid]

I have used their asset management services for a small percent of my NW to see how they do.

Bottom line is I do think their service is fairly priced. They agreed to only use the us equities for all the cash I gave them and yes it has outperformed s&p by a small amount. You need to keep in mind that the trading costs are free in their model w equities only.

I don't think there are many shops of comparable size that will do what they do for an squivqlent fee. Betterment and wealth front appear to charge less but all they do is balance among mutual funds or etfs. PC actually uses stocks.

Net net after about 2-3 years with them I think I am more likely than not to give them more assets to manage but not all of it.

That's good info.

I have listened to their sales pitch and haven't gone for it but might eventually. I do love their website for an asset snapshot though.

 

[exnavynuke]

I see your point, but the equal weighting of the 10 sectors while over-weighting the small and mid caps seems to require some stock picking rather than using indexed funds. Looking for some thoughts how to select the stocks and or funds to do this without their selection method. I assume they have a bit more of a computer algorithm than most. But that is why I asked the question, maybe its not that hard to do on your own and how do folks select the funds for the allocation strategy.

You can get just about any allocation you want with index funds. I use TD Ameritrade and thus have access to 100 commission free ETFs there. I put 16 of my favorites in an excel sheet and input their information over 3 tabs that let me see breakdowns of market capitalization, asset type, and industry. I put in my allocation to the funds and get a portfolio breakdown showing how that investment portfolio would be invested in each of those areas. It's not that hard to do and could be done with many, many more funds. My spreadsheet could be used for funds at any brokerage and can add as many or as few funds as desired.

You can click this link to download it if you want:

http://gceenterprises.com/jlcnuke/TDAmeritrade Commission Free ETF Select Information.xlsx

 

[Happyras]

I have used their asset management services for a small percent of my NW to see how they do.

Bottom line is I do think their service is fairly priced. They agreed to only use the us equities for all the cash I gave them and yes it has outperformed s&p by a small amount. You need to keep in mind that the trading costs are free in their model w equities only.

I don't think there are many shops of comparable size that will do what they do for an squivqlent fee. Betterment and wealth front appear to charge less but all they do is balance among mutual funds or etfs. PC actually uses stocks.

Net net after about 2-3 years with them I think I am more likely than not to give them more assets to manage but not all of it.

Thanks, this is the feedback and experience I was looking for. I do like the spreadsheet from exnavynuke for DIY.

 

[almost there]

Have used the site for a little over a year now. Great way to track "everything"
in one place. All on one screen. Also have used the Retirement Planner and like it as in contains fields like rental income, future SS, Annuity Income etc.
Have never thought twice about the advisory services though. Just a great place to track all your "stuff". Check in about once a week to see how things are going.

 

[Mo Money]

I can use a modest fleet of index etfs to meet or beat them in the long run, though I love their site for tracking net worth. When they project the performance of their suggested lower-risk portfolio compared to mine, the risk is not that much greater with my portfolio. And their projected return on my portfolio has always beaten their slightly "safer" portfolio. In short, their own projections convince me I am likely better off on my own.