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Personal Capital; and how to unload your unwanted stocks and funds

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personal capital

Personal Capital

If you have come here, read thru the Stock Series and decided the simple low-cost approach described makes sense, you are now faced with the problem of how do you get from where you are to where you want to be. That is, what do you do with all the investments you already have? How, exactly, do you move from point “A” to point “B”?

If you are like many readers, you’ve come to this blog having already spent years, maybe even decades, investing. You very likely have a wide range of stocks and/or funds that seemed like a good idea at the time but now, maybe not so much.

The first order of business is to get a grasp on exactly what you currently own, what it is costing you in fees and how/if it might fit into your new and future plans.

You may already have this well organized and at your fingertips. If so, well done and you can skip ahead to Part 2.

Part 1: Personal Capital

If not you’ll probably want to use one of the free tools out there, and Personal Capital is the coolest I’ve seen and one of the easiest. It is the one I recommend and it is the newest affiliate here on the blog. What that means is, if you choose to use it, this blog will earn a commission.

To use Personal Capital‘s free tools, click on the link and log in. Next you’ll enter your investments and bank accounts. While I don’t use Mint, some of my FI friends tell me entering your data into PC is even easier.

Once your info is entered, you’ll be able to keep track of all your accounts and the data will be updated automatically. You can even enter any paintings, antiques, jewelry and/or any other valuables you might own. Of course with those you’ll have to decide on their value and it won’t be automatically updated.

Your PC dashboard then automates your net worth calculation and updates every time you log in on your desktop, phone or tablet.

Once you are done, assuming you’ve entered everything correctly, you’ll have complete handle on your financial situation:

Net Worth

PC net worth

Fees on your funds

PC fees

PC retirement fees

Your current allocations

PC allocation_large

Cash Flow

PC cash flow

Retirement Planning

PC retirement

Note: The above illustrations are all courtesy of Personal Capital, from their website and are not from an actual client account.

At a glance now you’ll see what’s working and what you might want to change. As I say, very cool.

So what’s the catch?

Skeptic that you are (or should be) right about now you’re thinking:

“If this is all free, how do they make their money?”

Boy howdy! You sound like me!

This is a lot of cool and sophisticated stuff to provide for free and around here we know even we can be conned. When offered free stuff, it always pays to understand how the money flows. While my pals had already filled me in, this still was one of the key questions I had when I met with them at FinCon (see Sidebar below). Nothing like hearing it personally.

Turns out they are also financial advisors and several buttons on their site will direct you to this service. So what is happening here is, by offering these tools, they are also collecting data and in the process cultivating a very clean prospect list for their services. If your assets are large enough they will reach out to you and offer to sign you up.

My independent sources who have experienced this assure me it is very low key and low pressure. They don’t want to alienate anyone. The thinking is that as people get used to using their tools over the years, should they ever decide to engage professional guidance, Personal Capital will be the first in mind and the “go to” place. Seems a smart approach to me.

Meanwhile you can happily use the free tools and ignore the advisory service for as long as you like.

So should you use their advisory service?

Well, the the annual fees are:

.89% for portfolios up to $1 million and then…

  • .79% for the first $3 million
  • .69% for the next $2 million
  • .59% for the next $5 million
  • .49% over $10 million

Let’s look at it this way:

  1. If you are coming from a traditional advisor and paying upwards of 1% a year, Personal Capital looks very good and is worth your serious consideration. Especially if you find value in personal attention.
  2. If you just want some guidance setting your asset allocation and rebalancing it automatically, Betterment is a less expensive option.
  3. If you have read the Stock Series here and are comfortable with what you’ve learned, you should be able to handle this yourself. Go directly to Vanguard and their low-cost index funds. This is your least expensive option and at a million plus invested you’ll even qualify for their Flagship Service and some personal guidance.

Part 2: How to unload your unwanted stocks and funds

OK, now that you have the tools in place to assess what you own…

…once you do you might not like what you see.

But before dumping everything and moving on to better choices, you’ll want to think about some important considerations, mostly around the tax implications of selling an investment. But also how and where you want your assets invested going forward. Ideally you want to get this set up right and then, other than occasionally rebalancing, leave it alone.

First you’ll want to decide what your asset allocation should be. Selecting your asset allocation discusses ways to approach this and in it I share what we do personally.

When thinking about your allocation, think across all your investments and, if you are married, across all your investments for the both of you. For instance, our personal allocation to bonds is 25% and I hold our bond fund in my IRA. We could just as easily hold it in my wife’s IRA. Either way, it is 25% of our total holdings and keeping it in one place makes rebalancing easier.

Once you’ve decided where you want your investments to be, it is time to figure out how to move them around.

Tax-advantaged accounts

For those stocks and funds you hold in your tax-advantaged accounts, this is easy and there will be no tax consequences to your moves.

IRAs

In your IRAs you are free to buy and sell without tax considerations. However:

  • If you are moving from one IRA custodian to another be sure you do this as a “rollover” that goes direct from the one to the other. Vanguard, or any other custodian, will be happy to help you move to them. Just give them a call and they’ll walk you thru the process.
  • The above also applies if you are moving an old 401(k) to an IRA.
  • If you have a Roth IRA and decide you want to use a traditional IRA (T-IRA) for the tax deduction going forward, create a new T-IRA.
  • Do not transfer your Roth into a T-IRA. You’ve already paid tax on the money in the Roth. Just keep it and let it grow.

Employer sponsored plans: 401(k), 403(b) and the like

Here again you can move your investments around without tax considerations. You will, of course, be restricted to the choices offered by your plan.

  • My suggestion is to look for the total stock market and or total bond market index funds in your plan, if offered.
  • S&P 500 index funds are more frequently offered in these plans than the total stock market funds. No worries, these will serve your needs just fine.
  • The easiest way to find these index funds in your plan is to scan down the column on ERs (expense ratios). The lowest ERs will be the index funds.

Taxable accounts

Here again it is easy to make changes to your holdings, but now you must consider the tax consequences. If any.

First, look at your tax bracket. If you are in the 15% bracket or lower, great news:

There is no capital gains tax for you!

Capital gains enjoy favorable tax treatment and the rate is tied to the tax brackets for ordinary income. For 2015 it looks like this:

  • 10% or 15% tax bracket = 0% long-term capital gains rate
  • 25%, 28%, 33%, or 35% tax bracket = 15% long-term capital gains rate
  • 39.6% tax bracket = 20% long-term capital gains rate.

2015 Federal Tax Rates, Personal Exemptions and Standard Deductions

If you have short-term capital gains, these will be taxed at your ordinary income tax rate. Short-term gains are gains on assets held less than one year before being sold.

If you are facing capital gains taxes on the sale of your assets, only you can decide if making a change is worth it and you’ll have to do some math. But here are some considerations:

  • Figure out how much in capital gains you have in each fund or stock.
  • Do any have capital losses you can take to offset the gains?
  • Are they long-term or short term?
  • What is your tax bracket?
  • Can you defer income to 2016 and get down to the 15% bracket for 2015?
  • Just how ugly are the investments you have and how critical is getting rid of them?

Your capital losses offset your capital gains dollar for dollar.

From Turbo Tax:

“Losses on your investments are first used to offset capital gains of the same type. So short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.”

After you run the numbers, if you find you have a net capital loss you can apply up to $3000 of that loss against your ordinary income. If the loss is more than $3000 you can carry the leftover balance forward for use in future years.

Selling the cats and dogs in retirement

If you are currently living on your portfolio and you have holdings with taxable gains you’d like to unload, you might consider the simple strategy we used.

Assuming your unwanted investments aren’t too horrible, sell them off a little at a time to cover your living expenses in the first year or two. Start with your least favorite assets first and work on thru them bit by bit. This keeps the tax impact low and allows your preferred assets to grow unmolested.

 

There you have it. If you have experience using Personal Capital and/or your own strategies for unloading investments with taxable capital gains, please let us know in the comments below.

Meanwhile I’ll close with this instructional how-to clip:

50 ways to leave

Addendum:

May 9, 2018

In the comments below, reader Dave provides an excellent update mini-review on Personal Capital

 

Sidebar:  On the affiliates here

I link to lots of stuff; basically anything I see that I think might be useful, interesting or entertaining to you the reader. A few of these links are affiliates and these, along with the AdSense ads at the top and imbedded in some posts, pay the bills around here.

Personal Capital (PC) is the most recent of these and one of only six I have accepted. If you are curious immediately below is a list of the others.

PC first came to my attention ~10 months ago when a couple of financial bloggers I deeply respect suggested it would be a good fit here.

While impressed with what I saw, I waited until this past FinCon (financial bloggers conference) where I had a chance to spend an hour+ face-to-face with Michael the Director of Marketing, quizzing him closely and getting my questions answered.

While the affiliates here are companies and products I have personally vetted, those in the AdSense ads are not. Please see: Disclaimers

Important Resources:

  • Vanguard.com (unfortunately Vanguard doesn’t have an affiliate program)
  • Personal Capital* is a free tool to manage and evaluate your investments. With it’s great visuals  you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you’ll see what’s working and what you might want to change.
  • Betterment* is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • YNAB* has the best budgeting tools going and just might be the Best Place to Work Ever
  • Republic Wireless* is my $10 a month phone plan. My daughter is in South East Asia and is on the $5 a month plan. We talk whenever can and for ever long we please. My RW Review tells you how.
  • Tuft & Needle* helps me sleep at night. A very cool company and a great product.

*These are affiliate links and should you chose to do business with them, this blog will earn a small commission.

Unrelated, but here’s what I’m currently or have just finished reading and enjoyed*:

First line: “People do not give it credence that a fourteen-year-old girl could leave home and go off in the wintertime to avenge her father’s blood but it did not seem so strange then, although I will say it did not happen every day.”

Last Line: “This ends my true account of how I avenged Frank Ross’s blood over in the Choctaw Nation when snow was on the ground.”

How we came to be what we are, behave the way we do and believe what we believe. My favorite in this group.

Where people who live to be 100+ live, how they live and what they eat.

Bad monkeys are Sapiens that need killing, and Jane is on the job. If you are already paranoid, you might want to skip chapter: white room (iv)

Why the future might be incredibly good. Unless the grey goo gets us.

This might be the most enlightening and entertaining take on American history I’ve yet to read.

And here are three of my all time favorites:

The book that has most influenced how I live my life.

Deceptively simple, but really all you need to know about becoming wealthy.

Very possibly my all-time favorite novel.

*If you click on the books you’ll go to Amazon, an affiliate partner. Should you choose buy them, or anything else while you there, this blog will receive a small commission. This doesn’t affect what you pay.

Subscribe to JL’s Newsletter

Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Personal Capital is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.
  • Vanguard.com

Filed Under: Money, Stuff I recommend

Comments

  1. Great post, as always! A couple of questions for you that are semi related.

    1. Do you have any thoughts on ESPPs and whether or not to hold for a year or sell immediately? I’m in the 25% bracket, so it’s an extra 10% hit to sell immediately on any profits that come from the sale, but it removes any uncertainty & risk. My assumption is that it comes down to either taking the profit (and the bigger tax hit) immediately OR gambling by waiting a year and hoping that the stock price doesn’t drop by more than 11.5% (roughly) and then taking a lower tax rate hit (15%). I’m fairly risk averse these days, so I’ve chosen to just take the guaranteed profit, but just wondering if I’m missing anything here.
    2. Assuming I do sell immediately and therefore the profits are taxed as regular income, can I offset those gains by harvesting losses on stocks that I’ve held for over a year that have lost value, or can those losses only be used to offset capital gains profits?

    Thanks!

    Reply

    • Thanks Jupiter….

      Glad you liked it!

      1. An ESPP (employee stock purchase plan) is a wonderful benefit and anyone who has access to one should take advantage of it. But as you observe there are issues that need consideration.

      Once you own the shares, it is like owning any other stock in that you must determine (guess) how it is likely to perform relative to the market going forward.

      There is a clear tax advantage to holding for a year to take advantage of the long-term capital gains rates. But, of course, there is no guarantee you’ll have a gain at the end of the year. 🙂

      As you say it is a gamble. If you are working for a fast growing tech company it is a bigger gamble, both for the potential gain and loss, than if you are working for a large long established company.

      But even those seemingly solid, established firms routinely fall by the wayside. Consider that only one of the stocks that made up the original Dow Jones Industrial Average is still around (GE). A quick look at the so called “Nifty 50” stocks of the 1970s is sobering as well.

      The other thing to consider is that you already have your career and income tied to this firm. Tying too much of your investment capital to them as well adds an outsized risk.

      So we agree that selling is likely the wise course. But the timing of that sale requires looking into a crystal ball and yours is likely every bit as good as mine. Which is to say: Lousy. 🙂

      2. Great question! I think I’ll add this into the post….

      From Turbo Tax:

      “Losses on your investments are first used to offset capital gains of the same type. So short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.”

      Reply

      • Wonderful, thanks for the detailed follow up. Not having any capital gains this year means that I should be able to sell the poor performing stock and use the “capital losses” to reduce my taxable income. This is another good piece of tax strategy advice to add to the toolbox…of course, let’s hope I stop buying poor performing stocks moving forward. 😉

        Reply

      • I agree with the general point that you are very much financially entwined with your company, so why own a lot of its stock. I’m sure there may be exceptions, but as a rule, diversify and put your money elsewhere. In terms of timing, what is the downside of immediately selling your stock? I do “NetShares” meaning I pay the tax up front out of the shares that have vested so I don’t owe any taxes except for those on the capital gain. If you sell immediately, the gain is likely to be small (if there is any at all…hey that rhymes), so it’s not much of a tax hit. These events only occur for me twice a year, so it is a manual process and in the unlikely event that the gain is large, I can always choose not to sell at this time. I’d love to know if you see a flaw in my approach?

        Reply

  2. Hi Jim,

    Very interesting overview of Personal Capital. I am often surprised that people do not know how much their funds cost. After all, if you just type in the fund ticker you can probably see all relevant info.

    I am considering an opposite approach when I retire. I will likely sell most of my mutual funds in my 401 (k), HSA etc, and will purchase individual dividend paying stocks. I will live off that income. As we all know, accessing 401 (k), IRA, HSA tax-free, and without penalty is a nice lifehack ( and at the same time contributing to those during working years greatly reduces tax expenses on money coming in, reduces taxes on compounding, and results in more dividend income to keep and enjoy)

    Either way, enjoy your retirement.

    DGI

    Reply

    • Thanks DGI…

      Glad you liked it. I debated with myself about combining the PC review with the ideas on unloading unwanted investment, but they seem to mesh well.

      Retirement is a blast. I recommend it! 🙂

      Reply

  3. Thanks for this timely post! We’re going to read through your post again more carefully and look at some links and try to figure everything out, but we wanted to thank you ahead of time.

    After we discovered the very helpful FIRE community out there, we’ve been debating what to do about our investments. With shame and embarrassment we have to confess that we have been paying high fees on mutual funds (mostly American Growth and American Balanced Funds held at Edward Jones) aside from our more recent Vanguard Index Fund investments (VTSAX directly through Vanguard and VIIIX through our 401k).

    We want to (eventually) ditch other mutual funds and move everything to Vanguard, but we’re trying to tackle two issues: 1) we don’t want to pay capital gains on the American funds; and 2) would you believe we feel awkward about breaking up with the guy we’ve been talking to at Edward Jones over the years? (Do other people have these kinds of qualms?)

    We’re wondering whether we should just do this passively (and also deal with the capital gains issue), by doing what you suggest–selling a bit at a time after retirement, to live on. (But is it silly to hold onto these for another few years?) Any advice about how to handle the personal side of breaking up with your brokerage firm–when you’ve developed a relationship with someone there?

    Thanks again!

    Reply

    • Glad the timing worked!

      1. As I say in the post, you’ll have to look at your tax bracket, do the math, see what the tax hit is (if any) and then decide.

      2. Yes I think everybody has trouble breaking up with long-term advisors. One of their key skills is developing personal relationships to make it tough to do. Again, call Vanguard, explain what you want to do and they’ll help.

      3. It probably is silly, and expensive, tto hold on to them for a few more years. Plus the years it will take to spend them down.

      Breaking up is hard to do.

      That’s why I provided the instructional audio at the end of the post:

      “Just slip out the back, Jack
      “make a new plan, Stan
      “you don’t need to be coy, Roy
      ‘you don’t need to discuss much
      “just drop off the key, Lee
      “and get yourself free” 🙂

      Reply

      • Hi Julie and Will (and Jim!),

        Yes, the breakup worries suck! We’ve been using Personal Capital investment services (the paid services) for almost a year which is nothing compared to your relationship with Edward Jones, but I’m still concerned. They were the right choice for us at the time (I’ve been investing and reading personal finance for a little while whereas my husband had never invested anything ever and didn’t trust the idea, and after research, PC seemed like good middle ground compared to other investment advisors). Upon more research, their lower fees (again, compared to other investment people) will still hurt us quite a bit in the long run compared to Vanguard. I’m feeling more comfortable with the idea of doing our own investments independently. With that said, we’ve certainly made the most out of their financial advisory service and asking a ton of questions all the time about other financial decisions.

        I don’t look forward to the break up process (especially after moving everything over there!), but I’m making it an early 2017 project.

        Mollie

        Reply

        • So, Molly,

          It’s been 4.5 years. How did the breakup go? And are you happier in the new situation?

          Did you make any attempt to calculate your savings over the 5 years?

          Reply

  4. How is the recommendation for PC (with a .89 fee structure) consistent with your frequent VTSAX recommendations (ie, I hold the institutional version VITPX at ER .02)? As you pointed to, the ultimate intent of the freebie is a hook to the advisory fees. Short of some admittedly well designed graphs and projections, this would seems to open up the real possibility of an unnecessary drag on the FI goal (the advisory service fee upsell). Do the tools offered here differ substantially/meaningfully from those available at Vanguard? This is not intended as a drive by bash (I am a semi regular lurker on the site and find most of your posts practical and thought provoking) – I guess this one just struck me as odd and a bit of a justification for an affiliate relationship. Certainly Vanguard offers all the cool charts/projections at a much lower cost, no? I find myself still in the skeptic category as the upside of PC seems outweighed by the downside of potentially finding yourself in a hard to break up financial advisor relationship with a fee level that seems at odds for those following your set it and forget VTSAX posts.

    Reply

    • A closer read of the post might put your mind at ease.

      In it I explicitly…

      —start by saying those who have their info well organized can skip right over the PC section. And I mention it is not the only tool.

      —point out people can use PC’s free tools and never have anything to do with the paid service.

      —draw attention to the full costs of the advisory service.

      —show how I see PC v. Vanguard and, for that matter, Betterment.

      —make the point that for those who have read and who are comfortable with my Stock Series, Vanguard is the place. (But one thing I’ve learned over the past 4.5 years of writing this blog is that not everyone is.)

      I have always written a post about any new affiliate I accept. In these posts I explain why they made the cut, what value they offer and who I think might want to consider them. This takes time and effort, but I’m not willing to put something up without sharing my unvarnished opinion about it.

      If these posts read as tilting to the positive, it is precisely because if I don’t feel very positive about a company and its products and services, it will never see the light of day here.

      Case in point: I was just offered a lucrative deal to feature Jim Cramer’s website. As what Mr. Cramer does is incompatible with this blog and its ideas, the offer went into the bin without bothering my readers.

      Reply

  5. Jim,

    This is a very useful post that I wish you would have done a few years ago as we figured all this out on our own after reading the stock series. We initially were very emotional and wanted to sell off everything that we owned and start over. That is actually exactly what we did in our tax advantaged accounts.

    However, it is worth highlighting that one should be careful in taxable accounts to be aware that when selling off investments with gains that this income can hurt you not only once when you pay the capital gains taxes but again if these gains push your income over limits that would then not allowing you to deduct your IRA or contribute to a Roth. We therefore still hold one last actively managed fund three years after the lightbulb went on for us so that we can max our Roth IRA’s while gradually selling off these old dogs. Our Vanguard brokerage account makes it very easy to see where we are at with regards to short and long term capital gains making this process manageable even for new DIYers like ourselves.

    Finally, with regards to your above commenter I think you did a good job in the original post spelling out the positive and negatives of PC vs other options and you are very consistent with your message which is why I personally love your site and refer anyone who will listen to me to the stock series.

    Cheers!
    EE

    Reply

    • Hi EE….

      Sorry the timing wasn’t better for you. 🙂

      Actually, I’ve gotten a lot of questions on this subject of late and after answering them multiple times it occurred to me a post was called for. Plus I had been planning to write the PC post and the two seemed to fit together well.

      You make a great point in how capital gains can push up your tax bracket and push you over the limits for some contributions. Well worth considering!

      Finally, I’m glad to hear the PC description made sense to you.

      Thanks for your support of the site and for passing it on! 🙂

      Reply

  6. If you like Abundance, you will probably also enjoy The Rational Optimist by Matt Ridley. It is more of a rear-facing look tracing through history how much better things are today than the often glorified, pastoral past and how we have every reason to be continue betting on human advancement. A similar principle to your “betting on US companies to continue improving” stance for why the market always goes up and to the right… eventually. And if it doesn’t, our financial portfolio will be the least of our worries.

    Reply

  7. I loved this post and it totally aligned with my experience. I signed up for free accounts with a whole bunch of the automated investment firms to figure out what they offered and to be able to write a post about it (published this week!). I also recently went through a 2 day exercise of actually sitting down to map out all the stocks i hold thanks to my ETF/mutual fund holdings. Needless to say, it was crazy to me that it took so long to get the final tally and that some firms (ahem, FIDELITY), didn’t even let you see the holdings without going into the SEC database and doing your own run there. Once I was able to upload to Tableau to visualize my portfolio though, I was one happy camper. I particularly enjoyed your “what to do next” portion of this post. Keep up the good work! And I wanted to let you know that I’m referencing your blog in my post tomorrow! Thank you for being a luminary in the space and not being abrasive.

    Reply

    • Thanks Kim…

      I’m glad it resonated with you and I’m honored that you’ll be linking to it in your post.

      I look forward to reading it!

      Reply

  8. Hi Jim,

    Your website is AMAZING. I found it while i was browsing on Go Curry Cracker’s website. I was wondering if i can get your advice on switching brokerage company’s? I currently am invested in individual stocks with Scottrade. I would like to transition into Vanguard’s total stock market index fund but Scottrade charges 75 dollars to transfer out an account, i have 4 accounts with them. Do you thinks its best to just pay the transfer fee to move over to Vanguard or go with Schwab or TD because they will give me a bonus to switch to them? I can still invest in VTI with TD or Schwab’s version of the total market index fund. I really like Vanguard’s unique ownership but hate pay the fee to Scottrade. Your thoughts?

    P.S. Reading your Stock Series really convicted me that index funds are the way to go. Reading the comments to the link you shared on MMM’s website between Dan and Dividend Manta was really eye opening. I love you simple investing method and years of experience.

    Thanks in advance,
    Frank

    Reply

  9. Thanks Jim, this is just the kick in the pants that I need to get rid of some old ETFs. The fees aren’t too bad, but they’re under-performers. I always suspected that, but after your last post I used Stockchoker (great resource!) to see I where I’d be if I’d invested that same amount in VTSAX or the S&P and the difference was horrifying. I’m in a low tax bracket, so this seems like the right time. Thanks for the inspiration!

    Reply

    • Hi PFgal…

      Always nice to see you around here!

      Glad it helped and you have an opportunity to clean up those old ETFs!

      Reply

      • Thanks Jim! I haven’t commented in a while, but I read every single post 🙂 And today I actually sold off all of those ETFs! It was really nerve-wracking at first, but each time I hit “submit” I felt better and better. What a relief to finally get those taken care of!

        Reply

  10. Another awesome post Jim! I’m doing a combination of things right now: 1) Low cost S&P500 index and bond index funds in my 401K, 2) Simple 3-fund portfolio of broad market/low-cost ETF’s at Schwab for our IRA’s, and 3) Taxable account at Betterment. I also have a small amount (stock ETF’s) in my Schwab taxable account but I’m slowing moving that to Betterment.

    I’ve read your stock series, so I think I may know the answer to this question… But would you generally recommend NOT holding any bonds in a taxable Betterment account? I have a couple goals there, and one is part of my “emergency fund”. So it’s setup with their Safety Net goal and has a 60/40 split. My other goal has a 90/10 split. I’m thinking it might be better to consolidate those two goals, make it 100% stocks, and hold all bonds in my 401K and/or IRA’s.

    What say you?

    Reply

    • Hi Dave…

      Yep, because bonds are tax in-efficient with the interest paid, I prefer to hold them in tax-advantaged accounts.

      That said, one of the things I like Betterment for is more aggressive short-term savings and as place to keep emergency funds.

      Typically, these should be held in savings accounts. But, since those pay virtually no interest these days, a Betterment account with 50/50, 75/25 or even 90/10 bonds/stocks can give a better return for those willing to take on a bit more risk.

      Used this way, the Betterment account and bonds would be in a taxable account. But the amounts are typically small as is the tax impact.

      Hope this helps!

      Reply

  11. I started using Personal Capital and I find it depressing. I used to get such joy logging into all of my accounts. Now, it’s just so easy. I really don’t get it. I’m able to do the same amount of ‘work’ I was doing before, the market is just fine, yet it makes me want to go back and do everything manually… I don’t know why I’m so weird about it!

    Reply

    • LOL!

      It maybe you are obsessing obsessively over your holdings. 🙂

      I can relate. I still like my old cumbersome self created spreadsheets….

      Reply

  12. Thanks for the great posts, Jim! Just found your site last night and am reading through your Stock Series avidly!

    The good news is that I’ve now decided to go for Vanguard index funds.

    Next I am trying to figure out what to do with those old unwanted stocks that are under-performing. I think what I’m weighing up is: a) sell now and lick my wounds but stop the leak on what little is there (locks in 90% capital losses, the small amount remaining can start going into indices right away); or b) wait out the years until they are back in favour in the cycle and then sell (risk of non-recovery, opportunity cost now, but preserved capital if all goes well). Is there anything I’ve missed? Thanks for your thoughts.

    Reply

    • Hi Hanna…

      Thanks, glad you are enjoying it.

      In general I’d say, if you no longer think the stocks play a role in your portfolio, make the change and move on.

      There is no guarantee they will go back up or, even if they do, if they will be the better investment for you.

      While tough to take, capital losses do offer some tax advantages and if you can’t use them this year you can carry them forward.

      In short, if it is not something you’d buy today, sell and move on.

      All of that said, if it really is a very small amount of money and you want to hold on, in the big picture it won’t matter much.

      Reply

      • Thank you! That makes sense.

        This was a good motivator in particular: “In short, if it is not something you’d buy today, sell and move on.” It reminds me of allowing the old to move on so that the new can come in. Thank you for your time and your excellent blog posts!

        Reply

        • My pleasure Hannah…

          …and good to know.

          I almost didn’t bother to put that line in. Glad to hear it resonated with you.

          Reply

  13. Mr. Collins,
    When unloading one’s unwanted funds, what are your thoughts for figuring the basis for a fund? We’ve got roughly 9k in an old taxable account (front-loaded, w/ a 1.3% ER) that I’d love to move to Vanguard. It’s a dog of a fund that we purchased periodically from 2004-2014. I’m stymied, however, in figuring out the most appropriate way to move those funds to Vanguard, while minimizing the impact on our 2016 taxes. Any thoughts on what we should consider moving forward?

    I’ve looked around the BH’s forum and found plenty of info, but you have a much more succinct and clear way of explaining such topics. Would love to hear your thoughts if you’ve got the time.

    thanks again,

    Jager

    Reply

    • Hi Jager…

      Your current fund company should be able to tell you the cost basis. For instance, I can log on to my Vanguard account and instantly see my:

      —cost basis
      —average share price
      —current profit or loss

      Once you know the basis, you subtract that to get your taxable profit (or deductible loss)

      Once you have that, you need to determine your tax bracket and by extension your capital gains tax as I describe in the post.

      From there you just have to decide if you are willing to pay the tax, if any, if you sell. Or, if you might be in a lower tax bracket next year wait till then.

      But remember, even at their highest, capital gains taxes are pretty low. If you really want out and to move on to better things, don’t let the tax tail wag the investing dog.

      Good luck!

      Reply

      • Excellent stuff, and “should” is the operative word for company-provided information. I’ve reached out a few times to no avail finding one who can help. Concur w/ the simplicity of Vanguard–so straightforward I can even show it to our kids.

        At this point I think I will simply use the “average” basis and be done with it. We’re in the middle of our current bracket so I suspect I’m overthinking the tax side of this. Too cute by half and all…

        If I find anything revelatory in the process I’ll be sure to let you know. 🙂 thanks again for the help.

        Reply

  14. Mr. Collins,
    I love your blog-great information. Regarding PC-I have utilized this tool for some time and having everything in one place is awesome. I do have a very serious complaint with this tool however and that is the lack of capability to add or change expense categories to personalize spending. This is a major drawback and if you have any imput with the PC people bring it to their attention.
    Thanks

    Reply

    • Thanks Loren…

      Glad you like it!

      I’ve passed your concerns on the the powers at PC and and they are aware of this. Hopefully they’ll be along shortly to chat about it here.

      Thanks for bringing it up!

      Reply

  15. Below 15% tax bracket pays no capital gains taxes you said. Does that also applies for non-resident aliens w/ investments in the USA?

    Reply

    • My guess is, if you are filling out a 1040 tax form, it does. But you should consult a tax expect to verify.

      Reply

    • Hi Dave…

      I do not.

      No such tools existed when I began investing and so I created my own spreadsheets. These are now filled with my history and I am used to them.

      But they don’t have the cool graphics and options PC offers.

      Were I starting now, with PC available, I’d use them rather than inventing my own wheel. 😉

      Reply

  17. Hi!

    I wanted to mention to your readers that Personal Capital was initially a wonderful tracking option for my finances. The site worked beautifully and the customer/technical support was prompt and efficient. However, as of late Personal Capital seems to have some major technical support issues. Accounts simply will not link properly rendering the site unusable. I have sent in 4 requests for help with no response.

    Wondering if you or any of your readers could recommend a different site to help manage and track financial data?

    Sincerely,

    TQ

    Reply

    • Sorry to hear this, TQ…

      …my contact at PC has recently changed but I’ve reached out to the new person and hopefully she’ll reply here with an answer and solution.

      Unfortunately, I am unaware of another option, but as you say maybe one of my readers will have some ideas for you.

      Good luck!

      Reply

  18. This was a super helpful review and article, thank you!

    I would like to echo the above comment that I have also faced some recent troubles with importing my 401K accounts into the system. I love the dashboard, overview, and financial tools overall, but this leaves me with an incomplete picture.

    I also wanted to offer a story of an experience of someone who joined for the dashboard and recently had a free consultation with one of their financial advisors wherein they tried to sell me their services. It is “low-key and low-pressure” and “friendly”, like they promise, but there is still a little bit of pressure because it is an opportunity presented with some ‘limited time only’ language thrown in for good measure. Those of us who consider ourselves newer to investing are a little more vulnerable to fall for these spiels.

    As someone who took an extra few years getting my money out of an expensive relationship with Ameriprise due to inertia (but finally did it, yay!) — I find myself chagrined that I very nearly fell for the same thing again with Personal Capital.

    Going into these free consultations:
    Know your goals, Know your strategy, and Know that *you, too, can be conned!* (https://jlcollinsnh.com/2012/03/09/you-too-can-be-conned/)

    Be wary if you leave feeling unconfident about your “lack of cohesive investment strategy” or worried about “downturn protection.” Always know that this is your money, this is your decision, and you CAN say NO. Always know that what they are trying to sell you is just ONE strategy out of many; it’s never the holy grail.

    Most importantly, give yourself time. They will try to schedule a follow-up in two days; ask for a week. Hell, ask for more. You have time. Sit with things, so you can do the comparative research on fees, run the math on your numbers, and figure out if their strategy is aligned with your own values and goals.

    Hope this is helpful to people getting to know the world of investment and advisors and financial firms, as they are trying to learn, gain confidence, and navigate these tricky seas.

    Reply

  19. Hi Jim, To start I would like to thank you for this site, you have a gift which should help a lot of people.
    I have had a Personal Capital account fully linked to my accounts for a little over a year, I do not use their advisory service. I would say your review is accurate and for many people the PC site would be helpful.
    One area that you did not mention is identity theft. Since we have all accounts linked I check about once per day or every other day to review “transactions”. Should there be any credit card charges not made by the wife or I, we would know very quickly. Similarly, any withdrawals made from our credit union accounts or brokerage accounts would be quickly discovered. So I find this a valuable security feature.
    With one click I can see that my annual fees are .18% or that my stock allocation is 77%, cool stuff.
    Your description of the sales pressure was spot on, very low key. I probably get a voicemail about once per quarter from the advisory department which has always been polite and no pressure. I have never called them back so I cannot provide any insight on how that experience would be. I have no plans to use that service at this time. I would not want to pay the fees they charge since I seem to be able to ignore most of the market gyrations and the index funds suite me well. I would like to point out that a person who panics and sells at a loss may be much better off paying the .89% fee if it kept them from panicking.
    The one negative is every so often the PC site has some trouble connecting with my Credit Union site which usually is resolved in a week or two. I don’t know this for sure but I think the cause is related to the Credit Union’s site.
    For years I have maintained paper spreadsheets (showing my age of 57) and I still do twice per year. There is something comfortable about them and I kind of enjoy the twice yearly updating process. So that will continue.
    Keep up the good work and your book is excellent!

    Reply

  20. Hey Dave…

    Love the mini-review. Nice update to this post.

    So nice, I’m making it an addendum.

    Thanks!

    And glad you liked my book!

    Reply

  21. How does the Personal Capital security work? There’s a common technology now called OAuth that allows secure, limited access (read-only for example) to data on third-party sites like PC. Does PC use that or require you to give it your passwords for your investment/banking sites (huge red flag and showstopper for me).

    Reply

  22. Hi JL
    How about this situation.
    You have 100000 worth VTSAX in a taxable account.
    You have 60000 worth long term capital gain if you sell it and buy VFIAX.
    Your Taxable income is 150000 this year.
    Based on this data you will have to pay 15000 to IRS as LTCGT.

    How about you
    1 Pick a year that you have income that is below the 15% long-term capital gain tax rate which is 0%.
    2 Convert all your taxable assets [VTSAX] that have long term capital gain to equally performing assets[ VFIAX] and raise the basis while paying no capital gain tax.

    3 You can also intentionally lower your taxable income in one selected year to do this conversion especially if you have an extra-large capital gain.

    Ideal to do in the first year of retirement or any year that you take a break from work.

    What are your thots on this?

    Reply

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