Your Personal Finance Pro http://yourpfpro.com Personal Finance for Young Professionals Sat, 13 Oct 2018 00:14:03 +0000 en-US hourly 1 31591919 Free 1 Hour Portfolio Review With Personal Capital (Phone Call) http://yourpfpro.com/free-1-hour-portfolio-review-personal-capital-phone-call/ http://yourpfpro.com/free-1-hour-portfolio-review-personal-capital-phone-call/#comments Tue, 28 Oct 2014 14:47:27 +0000 http://yourPFpro.com/?p=5519 As some of you may be aware, one of my married life resolutions has been to work on streamlining my finances.  In the past, I kept a separate Mint account for me and my wife but going forward we’re going to be using just one joint Personal Capital account.  It was painful adding her student […]

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As some of you may be aware, one of my married life resolutions has been to work on streamlining my finances.  In the past, I kept a separate Mint account for me and my wife but going forward we’re going to be using just one joint Personal Capital account.  It was painful adding her student loans in there but sometimes these things have to be done.

Initial Impressions

I’m now a few weeks in to my Personal Capital experiment and I have to say that I’m really liking the service so far.  I think it has a lot to do with the fact that they bring that start-up mentality and disruption factor to an industry that badly needs it.  There are still a lot of bad investment advisors out there (the majority actually) but PC is doing some pretty cool things when it comes to offering unbiased low cost advice targeted towards millennials.  And it seems like the general trend in the industry is also moving towards low cost index investing which is a good thing for everyone.

Related Article: Getting Your Account Setup With Personal Capital

Budgeting Needs Work

I have been using Mint for years now and their budgeting and account aggregation features are pretty solid.  Unfortunately, PC has a ways to go in this department.  Since they are really more focused on the investment side of things (that is how they make their money after all), their budgeting and spending features are not quite where I need them to be yet.

I am going to cut them a little slack in this department though since at the end of the day, these features don’t make them any money.  So from a business point of view they’re obviously going to give priority towards the investment side of things first.  I’m hoping that they eventually spend more time fixing a few things though:

  • Bulk edit/modify accounts: I accidentally added my Chase account twice and then had to go in and manually delete 12 duplicate accounts (I have a lot of credit cards 🙂
  • Manipulating Transactions: Personal Capital does an ok job of categorizing transactions but I wish they would give Gmail like filtering options to allow me to categorize certain transactions from certain accounts the same way every time.  Right now, I am having to make way too many manual changes.
  • Just Copy Award Wallet: Award Wallet is a site that I use to track over 50 airline, hotel and credit card loyalty programs between my wife and I.  They have account tracking and management down to a science.  I really hope that PC takes a look at what Award Wallet is doing and just straight copies them.  Right now, it’s impossible to view only my accounts or only my wife’s accounts (she doesn’t like me seeing what she spends here money on and neither do I since then I ask her why she went to Jack in the Box) and it would be cool if they added a feature to auto-login to your account when you clicked it.  Again, look to Award Wallet.

My Free 1 Hour Portfolio Review

I think technically this was only supposed to last a half hour but my advisor was very cool about time and never seemed like he was in a rush to get off the phone.  That was actually one of the things I liked most about the call, my advisor seemed very concerned about making sure that all my questions were answered as opposed to just running through the presentation and trying to get me to sign up.

Presentation

The point of the phone call though is to have your advisor walk through your portfolio and highlight your current holdings, show where PC can make some improvements, explain how PC would invest your money, answer any questions you might have and then try to get you to sign up.

I was actually pretty impressed with the presentation since it seemed like some real work went into it.  For a free consultation, I wasn’t expecting such thoroughness but they really did a great job.  I don’t know if they’ll be able to offer this forever so I would definitely recommend that you take advantage of this free consultation while you can!  You are supposed to have 100k of investable assets but it didn’t seem like a very strict requirement, I’m sure you could probably just schedule it either way and they’ll take a look at your portfolio for you.

Sign Up For Personal Capital Today And Get Your Free 1 Hour Portfolio Review

Current Allocation

The first slide we took a look at was a nice presentation of my current asset allocation.  It looked pretty much as expected other than the fact that it was missing some of my bonds since PC was unable to categorize one of my unlisted old 401K bond funds.

A lot of big company’s offer 401K funds that are specific to that company so PC or any software for that matter won’t be able to categorize them.  But if you’re not investing in anything too crazy, you should be able to find a reasonable approximation.  I just forgot to do this before the call so my chart was missing some bonds.  Here’s what my allocation looked like:

Free 1 Hour Portfolio Review With Personal Capital (Phone Call) Asset AllocationMy allocation was actually right about on the money.  A few years ago I decide on a 90/10 stocks/bonds allocation (the missing bonds would bring the bond total to about 10%) with 35% in international stocks and a tilt towards small cap stocks.

This is one of the reasons why PC is so cool since all of the charts they showed in the presentation are available in one form or another right on your dashboard.  They won’t be given to you in chronological order like this handy presentation but you can really take an in-depth look at your investments and see how things like your allocation is doing.

My Advisor’s Observations & Recommendations

I was very curious to hear what my advisor had to say about my portfolio because I honestly haven’t even touched it in a year or two.  I’m not even sure I’m going to re-balance my portfolio ever again (that’s a story for a future article though) since I really value simplicity when it comes to investments.  I like being able to do a lot of work and upfront research to figure out an investment plan and then sticking to it for 40 years.  I haven’t seen much evidence that shows tweaking your portfolio all the time adds value so I’m not going to be doing it.

Alternative Investments

One of the things my advisor brought up was that my portfolio was lacking alternative investments like real estate, gold and oil.  Wait what?  Since when did gold and oil become solid alternative investments?  My advisor explained all about market volatility and how investors want mutually exclusive asset classes that have low correlation.  Translation: you want to find things that go up when stocks go down and vice versa.  But I’m not sure gold and oil are the answer, that part kind of left me scratching my head.

Heavy Sector Skews (Technology & Financials)

The other thing my advisor pointed out is that my portfolio has high sector skews towards technology and financials which obviously makes sense because I have a lot of my domestic stock allocation in an S&P 500 Index Fund.  For those who don’t know, that type of fund invests in all of the biggest companies in America by market cap and it just so happens that a lot of the biggest companies in America are tech and finance.  So it would make sense that my portfolio reflected that.

Personal Capital uses a strategy called tactical weighting by sector.  So instead of investing according to market cap like a normal S&P 500 fund would do (the one that I own) they would invest your money evenly across all sectors.  Now this is where the pitch starts to get a little sales-y.

Any time you hear the word tactical and you’re not buying military gear, you’re probably about to get ripped off.  So when I had to Google tactical weighting by sector, I kind of already knew what I would find.  The gist of this strategy is fine and it makes sense as an alternative to market cap but I don’t see it as a superior strategy.  My advisor used past performance of this strategy to show how it outperformed a market cap strategy but we all know that past performance is no guarantee of future results.

I think the biggest problem with ‘tactical weighting by sector’ is that it starts to bring a lot of un-needed complexity to your portfolio.  Try doing this on your own and you’ll see how much more difficult it is than just buying an S&P 500 fund.  And that’s where PC will step in, they will offer to do this for you 🙂  In short, there’s no guarantee that this strategy will outperform market weighting but it does sound really cool.

I actually asked my advisor if this equal weighting strategy helps with volatility or increased returns and he told me both!  Ok, now this is where I wanted to say something but I didn’t.  You can’t reduce volatility and increase returns!  I might have believed less volatility, same returns but there’s no evidence that shows less volatility and more returns.  That is the whole point of taking higher risk, to get higher returns.  Remember, risk and return will ALWAYS be correlated.

My Optimal Allocation

Here’s the optimal allocation they recommended for me:

Free 1 Hour Portfolio Review With Personal Capital (Phone Call) Asset Allocation

I value simplicity in my portfolio.  For newbie investors, I usually recommend a target date retirement fund and the Boglehead’s Guide to Investing.  When I looked at this allocation, there is just way too much going on in the alternatives and bonds section of my portfolio.  Considering alternatives makes up only 11% of the portfolio, do I really need 2.2% precious metals?  That’s going to be .24% of my overall portfolio, I don’t see how that’s going to make much difference.

I still think a simple target date retirement fund or a three fund portfolio works wonders (US Stock, Int’l Stock, Total Bond + small cap/emerging market tilt if you are a little more advanced).

My Thoughts On The Presentation

At the end of the presentation, I was definitely glad that I went through with it.  I didn’t necessarily agree with everything that was said but there were some things that stood out to me about my own portfolio that I will keep in mind going forward.  There was a standard sales pitch at the end but I thought that was a pretty fair trade off for an hour spent analyzing my portfolio.

The only other thing I didn’t like about the presentation was that my advisor kept on emphasizing how PC can beat average returns.  Wait, huh?  Do you guys have some magic formula that not even the top money managers over the last century have been able to crack?  I don’t think so but let’s say PC does have some magic formula and their ‘tactical sector weighting’ (see how silly that sounds) does outperform the market.  Are they going to outperform it by 1% (their AUM fee)?  I highly doubt that.

I thought this part of the pitch was not in line with what PC stands for and it may have been just my advisor but I’d be curious to hear what other people’s experiences have been like.  I suppose it’s not good business though to tell people, “hey we’re going to do a really good job but we can only get you .89% less than the average market returns”.  But that really is what they should be selling because that is what is going to happen, history doesn’t lie!  And although PC isn’t quite active management, their fees are about 10x the do it yourself price.

Would I Invest With Personal Capital?

The short answer is no.  I love what Personal Capital is doing and what the company stands for but at this point in my life, I don’t see much value that would warrant a .89% fee.  There’s definitely something to be said about finding an advisor or a company you can trust and leaving your money with them until you need it at 65 though.  That peace of mind is definitely worth something to me but it’s probably in the .3-.5% range.

With all that being said though, is PC a better option than your average financial advisor?  Heck freaking yeah!  These guys have very little conflicts of interest and although they work on an Assets Under Management (AUM) model, they are free to recommend low cost ETF’s and they aren’t required by management to try and sell you everything.  Despite the .89% fee, they really are looking out for you and want to help you succeed and make as much money as possible.  I think PC should focus on targeting all the people who have bad money managers, they are the ones who they can really help.

The Catch 22 Of A Financial Advisor

This brings us to the problem of what I like to call: “The Catch 22 of A Financial Advisor”.  Most people who have financial advisors take a very minor role in their finances.  They let their advisor handle all that complicated math stuff.  When the market goes up, they see their balance rise and they’re happy.  But since they don’t know to compare their returns to the market average, they don’t know that they’re under-performing the market by 1-2% generally.  PC’s own presentation gave me a stat that says 72% of active managers have underperformed the market average over the past 10 years.

Remember, there are a lot of bad financial advisors out there but investing money on your own really isn’t that hard.  It takes a little bit of time and effort and a lot of discipline.  Once you’ve taken the time and effort to research the basics of investing, you’ll know exactly what to look for in a good investment advisor.  And therein lies the problem: once you know what to look for in a good advisor, you’ll also realize that you can do just as well on your own.

That my friends, is the Catch 22 of a Financial Advisor.

If you haven’t signed up for Personal Capital yet, I recommend you do so now and get your free 1 hour portfolio review.  Even if you don’t end up investing with them, it’s a great tool to track your investments and the portfolio review is completely free.  I receive a small commission from everyone that signs up so if you end up using my link, please drop me a comment so I can personally thank you.

-Harry @ PF Pro

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Do You Pay With Cash or Credit Cards? http://yourpfpro.com/pay-cash-credit-cards/ http://yourpfpro.com/pay-cash-credit-cards/#comments Fri, 23 May 2014 12:51:30 +0000 http://yourPFpro.com/?p=3778 Most of the credit card articles on this site have to do with the points and miles you can accumulate by signing up for various cards and spending on daily purchases.  But one of the first things I recommend to someone struggling with their spending is to get rid of their cards and start paying […]

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Do You Pay With Cash or Credit CardsMost of the credit card articles on this site have to do with the points and miles you can accumulate by signing up for various cards and spending on daily purchases.  But one of the first things I recommend to someone struggling with their spending is to get rid of their cards and start paying solely with cash.  It’s no secret that it’s easier to spend more money with credit cards versus cash and there are tons of studies(here’s one) that prove that fact if you don’t want to take my word for it.

But once you’ve got a grip of your finances you will probably notice that paying with credit has a lot of benefits.  We all know about the cash back rewards you can get but there are also things like sign up bonuses, fraud protection and just plain convenience.  Even though I’m always telling my friends to sign up for Ally Bank for their free ATM withdrawals, most of them still use big banks like Chase or Citi and we have to plan our trips around finding a Chase ATM.  That’s just an added layer of inconvenience to paying with cash.

I’ve got 25 credit cards right now but I’ve got them all set up on Autopay and I check all my daily transactions at once using Mint every morning.  The whole process takes about 2-5 minutes depending on how many purchases I’ve been making and then I’m done.  I like this system because the one thing I value the most in my life is my time.  No matter how much money you’ve got you’re never going to have more time than someone else(we don’t live in a Justin Timberlake movie).  So I try to live my life as efficiently as possible and credit does wonders to simplify my life.

Credit Cards are Convenient

Right now, I’m putting most of my purchases on my Barclay Arrival card since it’s giving me 2.2% cash back on all purchases.  But the rewards probably pale in comparison to how much more I’m spendingthan if I were to be paying with all cash.  Just think about the last time you were out with your friends and you paid for that extra round of drinks.  When you pay with your credit card, it just doesn’t feel like real money since all you’re doing is signing a piece of paper.  You don’t see the actual transaction debit your account unless you use a service like Moven which alerts you of your spending in real time.

I live in Southern California and nearly every single business I frequent accepts credit cards.  Even food trucks are taking credit cards now that inventions like Square have popped up enabling merchants to pay a small percentage of every credit card transaction.  Right now, my wallet consists of two credit cards, one ATM card, my drivers license and a few business cards, that’s it.  It’s actually more of a bill holder and you can barely see it through my slim fit pants!  If I were to lose any of those credit cards, it wouldn’t be a big deal at all since I could just get them replaced and ask for free expedited shipping.  I’d only have to go a day or two without those credit cards.

Even though I would never make a $20,000 purchase, the two credit cards in my wallet carry a combined credit limit of 20k.  That’s like walking around with $20,000 in your pocket but there is absolutely no risk.  If my cards get stolen, I would simply give my bank a call and let them know when it was stolen and I would not be responsible for any fraudulent charges.  If your card is stolen, Federal Law limits the liability of cardholders to $50 no matter what amount the unauthorized user charges.  And since the credit card business is so competitive, every one of the major companies tend to waive this fee.  That’s why you never have to pay any amount for unauthorized charges when your card is stolen.

Tracking Your Finances

Since I’m big on technology, I like having all the information about my spending patterns and habits at my fingertips.  It’s pretty easy to analyze my budget since I pay for everything with my credit cards.  I don’t need to enter all my cash expenditures into a spreadsheet one by one since I have computers that can do all that for me.  There are times when I need to look up certain transactions and credit cards make that really easy.  When it comes to tracking your finances, credit cards are vastly superior to paying with cash.

Readers, what do you think about paying with cash versus credit?  Do you think the convenience and benefits of credit cards justify the extra spending?

-Harry @ PF Pro

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My New HSA Provider: Eli Lilly Federal Credit Union http://yourpfpro.com/new-hsa-provider-eli-lilly-federal-credit-union/ http://yourpfpro.com/new-hsa-provider-eli-lilly-federal-credit-union/#comments Mon, 31 Mar 2014 15:59:06 +0000 http://yourPFpro.com/?p=4265 Update(4/21/14):  ElfCU now charges a $24 wire transfer fee for transferring your money from ElfCU to TDA. Update(5/28/14):  ElfCU now charges a $3 monthly account fee if you don’t hold at least $2,500 in the savings account.  Still the best option in my opinion though. Last year I wrote an article about how to rollover […]

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Update(4/21/14):  ElfCU now charges a $24 wire transfer fee for transferring your money from ElfCU to TDA.

Update(5/28/14):  ElfCU now charges a $3 monthly account fee if you don’t hold at least $2,500 in the savings account.  Still the best option in my opinion though.
My New HSA Provider: Eli Lilly Federal Credit UnionLast year I wrote an article about how to rollover or use a trustee transfer in order to invest your HSA money for free using HSA Bank. Well it’s been a year and my investments have done very well(thank you S&P Gods), but I was only able to invest about $7,000 of my $12,000 balance. The reason why is that HSA Bank requires you to hold $5,000 in their savings account in order to avoid maintenance fees.

I had a short discussion with Blake in the comments section of that article about the opportunity cost of investing that $5,000. He argued that the investment gain would outweigh the few bucks a month in fees. Blake was totally right, but I still didn’t want to invest that money because I just couldn’t bring myself to pay a fee – it goes against everything I believe in 🙂 But alas, I’ve found a new credit union that allows me to invest all of my HSA money(hat tip to TFB).

ElfCU to Save the Day

I used to have two HSA’s.  The first one was my HSA Bank account that was formed when I rolled over my last employer’s HSA(I no longer have this account anymore now that I’ve rolled it over to ElfCU) and the second one was through my current employer.  I still have the second one but it’s administered by Health Equity and the investment options are very poor.  There are a limited array of funds and most of the expense ratios are around 1%, yikes!

ElfCU is a small credit union that anyone can join with a $5 contribution to TruDirect. They have no monthly fees on their HSA’s and you can invest 100% of your account through TD-Ameritrade. TDA charges normal brokerage fees but they do have a wide selection of no cost ETF’s. Since HSA Bank also used TDA I’ll be able to keep the same funds and asset allocation.

So now I have two HSA’s: one with ElfCU and one with Health Equity.  I plan on keeping my Health Equity account in cash and rolling it over once or twice a year for free to my ElfCU HSA where I can invest everything with no fees.  So there you have it, I finally have an HSA that has no minimums and no fees and it lets me invest in my no cost ETF’s with TD-Ameritrade.

The Process

If you’re interested in rolling over your HSA to ElfCU the first thing you’ll want to do is open an account with ElfCU.  You’ll have to make a $5 donation to TruDirect but that ends up showing up in your savings account once you’re all done.  After I signed up, I got an e-mail confirmation from ElfCU with my member ID, HSA account number and money market savings account number.

Logging in to ElfCU HSA

Logging in to your ElfCU HSA is relatively easy. You can navigate to www.ElfCU.org/HSA and select HSA Account Login or you can use this link to go directly to their HSA login page.

I wasn’t able to register/create an ID for my HSA using my HSA number until the day after I signed up though. ElfCU uses a third party site called Marsh HSA Services to manage their HSA accounts. You can login/create a new ID using this page.

Logging in to ElfCU Online Banking

Since ElfCU uses a third party site for their HSA accounts you’ll need to create a separate login for their online banking system. You will also get a savings account when you sign up for an HSA since they are a credit union.  This is the account that you would link to Mint or Quicken in order to view your HSA balance.

It took a few days(HSA login will be instant) before I was able to register for a new ID but the process was nearly identical to registering for the HSA member ID.  After 3-4 days, I went to www.ElfCU.org and selected enroll in eBranch. When I logged on for the first time, I saw that I had $5 in my savings account and it also showed my HSA balance of $0.

Transfer Money from HSA Bank to ElfCU

Since I had investments through TDA/HSA Bank, I had to first liquidate my TDA account and transfer it back to HSA Bank(this process took about a week). Once the entire account balance was in the savings portion of my HSA Bank account and my accounts were all set up at ElfCU, I filled out a transfer form and e-mailed it to ElfCU at: Sping@elfcu.org.

This transfer form will effectively close out your old HSA and transfer it entirely to ElfCU. HSA Bank charges a $25 account closure fee but there are no other fees to transfer.  If your HSA provider charges a transfer fee you can write yourself a check and do a direct rollover(only one of these allowed per year though) but that seemed like a lot of work for $25.

Almost There

About 4-5 days after I e-mailed in my transfer form to ElfCU I noticed that my HSA Bank account had been liquidated(and I was charged a $25 account closing fee). 10 days after that, the money showed up in my ElfCU HSA and I opened a TDA account and got to investing!

Editor’s Note: I have no financial relation with ElfCU. But I use them because they don’t charge any monthly fees on my HSA account and I can invest my entire balance for free.

Readers, where do you invest the money in your HSA?  Do you pay for all of your medical expenses out of pocket like I do so that you can maximize the triple-tax power of the HSA?  Think it’s worth it to switch to ElfCU?

-Harry @ PF Pro

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The Most Powerful Budgeting Tool Around: Mint.com Review http://yourpfpro.com/the-most-powerful-budgeting-tool-around/ http://yourpfpro.com/the-most-powerful-budgeting-tool-around/#comments Fri, 09 Mar 2012 04:51:11 +0000 http://yourPFpro.com/?p=328 Have you heard of Mint.com?  Mint is a personal finance site that links all of your financial accounts to one place and helps you keep track of your expenses.  They also have a handy iPhone app that I use every day to stay on top of my spending.  The best thing about Mint is it’s […]

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Have you heard of Mint.com?  Mint is a personal finance site that links all of your financial accounts to one place and helps you keep track of your expenses.  They also have a handy iPhone app that I use every day to stay on top of my spending.  The best thing about Mint is it’s free!  There are some other financial aggregators out there, but Mint is by far the best.  In fact, they were recently purchased by Intuit(makers of Quicken and TurboTax).

The only downside to Mint is the fact that you must sacrifice all your personal financial information.  Personally, this doesn’t bother me because I use Mint every day to spot financial abnormalities.  Mint covers its operating expenses using advertisements and customized product recommendations.  It uses your data to provide relevant advertisements to its consumers.  

So Why Use Mint?

I use Mint because it’s simple and streamlined.  It allows me to check my daily spending and stay on top of my budget.  If you’re struggling to save, Mint can be an effective budgeting tool.  It’s still up to you though to follow through and track your spending.  When I joined Mint about a year ago, I set up a simple budget that would allow me to save $1,000 dollars a month if I followed it.  Here’s an example of my budget from last month:

 At the end of each month, I like to go through my budget and see what I overspent on.  I make a conscious effort to reduce that the next month.  Looking at this budget, you can see that I did a pretty good job saving this month.  My only large purchase came under ‘Everything Else’ when I put a deposit down on a hotel in Hawaii.  It’s easy to forget about what purchases you make each month, and I love how Mint automatically categorizes all your credit card transactions.  In addition, you can also enter cash transactions with their mobile app.  In January I was over budget on Alcohol & Bars so I made sure to cut back in February 🙂

Why Not to Use Mint?

Although Mint is technically free, you are ‘paying’ for their services by providing them with all your financial purchases.  This data is very valuable to financial services companies and Mint makes a lot of it’s money from affiliate advertisements.  For example, if you are charged an annual fee on your credit card, Mint might recommend you apply for a new no annual fee credit card.  Some people might find this handy, but others may find it obtrusive.

Remember though, no humans(even Mint employees) are able to access your user name and passwords for your other financial sites.  Although a security breach is possible and we often hear about it in the news, I don’t think it should stop you from using Mint.  If you use Mint every day like I do, you’ll be able to stay on top of any abnormal activity.

So what do you think, are you willing to sacrifice all your personal financial information for a great free service like Mint?  Or do you like to use a less intrusive budgeting software?


FREE Money Management

-PF Pro


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