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Personal Capital Review and User’s Guide (Update for 2022)

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Personal Capital is a financial tool that enables you to manage 100% of your finances from a single dashboard. I’ve used the app for years. In this Personal Capital review and user’s guide, I’ll walk through all of its features and how to leverage them to help you make the most of your money.

Table Of Contents
  1. Getting Started with Personal Capital
  2. Personal Capital Banking
  3. Personal Capital Investing
  4. Personal Capital Planning
  5. Personal Capital FAQs

This article contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. The opinions and views expressed, however, are our own.

Getting Started with Personal Capital

The first step is to sign up for a free account. Then you want to connect all of your financial accounts. While Personal Capital is perhaps best known for analyzing and tracking investments, I also connect all of my bank accounts, credit cards, loans, mortgage, and even my home. You can add your home and Personal Capital will pull in the value from Zillow.

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Linking Your Accounts

Over the years I’ve linked may of the following types of accounts to Personal Capital:

  • Bank Accounts (checking, savings, CDs, money market accounts)
  • Retirement Accounts (401k, 403b, TSP, IRA, among others)
  • Non-Retirement Investment Accounts
  • HSA
  • Credit Cards
  • Mortgage
  • Student Loans
  • Personal Loans

You can link just about any financial account for which you have online access. You’ll need your username and password for each account. To link an account, you’ll search for the name of your financial institution in the “Link Your Account” dialog box on Personal Capital (you get to it by clicking the “+” icon near the top left of the Dashboard):

Link Your Account to Personal Capital

Tip: You can search by the name of your financial institution or by its website address (url). In the unlikely event you have a financial account that can’t be linked to Personal Capital, you can enter it manually.

So why bother to connect all of your accounts? As you’ll see below, Personal Capital does a lot more than keep an eye on your investments. By connecting all of your financial accounts, you can track your net worth, budget, cash flow and even your bills. And all of this information is pulled together in a Dashboard.

Settings & Profile

Once you’ve linked your accounts, it’s critical that you complete your Settings and Profile. Both can be found by clicking on your name in the top right corner of the screen.

With Settings, you have control over email subscriptions (you can get daily or weekly updates of all your income, spending and investments), whether to include investment income and dividends in cash flow (I do), and any accounts to exclude from the advice Personal Capital offers (I don’t exclude any).

Settings also include important security features. It’s here that you can configure multi-factor authentication (highly recommended) and an alert anytime a login is attempted from a foreign country (also highly recommended).

Personal Capital also shows you a list of the devices you’ve authorized to access your account and when the last sign-on from that device occurred. I’ll often delete old devices I no longer use from this list.

The Profile is where you can set information about you and your spouse, your savings, income sources, and investment objectives. These are important settings that Personal Capital uses in its planning tools, such as its free Retirement Planner.

Dashboard

Once you’ve linked all of your accounts, Personal Capital aggregates it in the Dashboard. The Dashboard gives you a snapshot of your entire financial picture. Here’s what the dashboard looks like:

Personal Capital Dashboard
Personal Capital Dashboard

As you can see, it gives you a snapshot of your net worth, your monthly budget, your cash flow, your investments, and even where you are on your retirement and emergency savings goals.

Net Worth

There’s nothing more important to your financial freedom than racking your net worth. While I’m a big believer in keeping tabs on it in a spreadsheet (which I’ve done for years), I also track it in Personal Capital. If you connect all of your financial accounts, it’s tracked automatically.

Here’s what the Net Worth screen looks like in Personal Capital:

Personal Capital Net Worth
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Personal Capital Banking

I’m surprised at how much I use the banking features of Personal Capital. The primary features that I rely on are the Cash Flow and Budgeting functions. Specifically, the tool shows me how much investment income we generate each month (interest and dividends). The budget tool shows me how much we spent and on what by category.

Cash Flow

Cash flow shows both your income and expenses at a transaction level. Expenses are automatically categorized. You can easily drill down into income or expenses to look at the details.

You can also select which accounts to include in the report. I use this account selection feature to look at just my business expenses (I’ve connected by business checking and credit card accounts). I also use it to look at income just from my investment accounts. This allows me to quickly see all dividends and interest earned in my portfolio.

Personal Capital Cash Flow Calculator

Budgeting

The budgeting feature is not a traditional budgeting app. You can set an overall monthly spending goal, but you can’t set goals by category. If that’s what you need, I highly recommend YNAB (You Need a Budget).

What Personal Capital does well is give you visibility into how you’ve spent your money by category. It automatically imports all spending from each linked account and categorizes the spending. You can customize the categories. I’ve found Personal Capital to do a reasonably good job of getting the categories right, although I do spend about 5 minutes a month correcting some transactions.

Tip: In addition to categories, you can tag transactions, too. I use a limited number of categories, and than tag transactions as needed. For example, we have a home maintenance category. For work on our pool, I tag those transactions as “pool” so I can see how much we spend on the pool without need to create a separate categori.

Bills

The bills feature is another reason to link your credit cards, mortgage, and other loans. Personal Capital keeps track of when bills are due with your linked accounts. This helps you avoid missed or late payments, and it helps with planning throughout the month.

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Personal Capital Investing

Here’s where Personal Capital really shines. Once you’ve connected your retirement and non-retirement accounts, it tracks your investments automatically. It updates prices throughout the trading day and keeps tabs on mutual fund expenses. It also shows you your asset allocation and offers a number of tools to help you evaluate your portfolio

Holdings

You get an overview of each of your holdings. The tool shows the following for each investment you own:

  • The name of each investment
  • Its ticker
  • How many shares you own
  • The current price
  • The days change (in both dollars and as a percentage)
  • The total value

It also gives you an overview of your performance. Here’s mine in the middle of the 2020 bear market (Yikes!):

Personal Capital Portfolio performance Graph

Allocation

Personal Capital also shows you your asset allocation. It automatically evaluates your investments and reports on your stock/bond allocation. For each it breaks down asset classes further, showing U.S. and International stocks and bonds, as well as alternatives.

The tool also provides a useful interactive graphic representation of your portfolio allocation. With the click of a mouse, you can explore what investments make up each of these asset classes. One interesting item is cash. The asset allocation tool not only shows you the cash in say money market accounts, but it also sees the cash held by stock mutual funds.

Tracking Bitcoin & Crypto

In big news for those who invest in Bitcoin, Ethereum, Litecoin and other cryptocurrencies, Personal Capital can now track these investments. Best of all, investors do not need to grant access to their crypto wallets or turn over passwords.

Instead, investors can add a manual account in Personal Capital. For each token owned, you simply indicate the symbol, exchange and amount. Personal Capital is now able to track thousands of tokens across hundreds of exchanges.

Personal Capital Planning

So far the dashboard has simply shown you your accounts and investments from various perspectives. It’s the planning tools that really take the tool to the next level.

Retirement Planner

Personal Capital’s retirement planner is both robust and easy to use. Because you’ve connected all of your investment accounts, Personal Capital can use this data to determine your retirement readiness. The screenshot below shows you want the calculator looks like once you’ve linked your accounts.

Personal Capital Retirement Planner

There’s a lot going on here, so let’s break it down:

  • Profile: In the bottom right of the above screenshot is the “Edit Profile” button. It’s here that you can set your marital status, tax filing status, you and your spouse’s name and dates of birth, how much you each earn per year, and any children you have.
  • Assumptions: The “Edit Assumptions” button enables you to set an estimate of your effective tax rate, inflation rate, and your life expectancy.
  • Income Events: You can add ongoing or one-time income events. These may include your yearly savings, a planned sale of a business or other asset, pension income you’ll receive in retirement, and even an estimate of your social security.
  • Spending Goals: Spending goals can include an estimate of your yearly spending in retirement as well as one-time expenses. For example, you could include the cost of a planned vacation in retirement or the cost of a future wedding for your children.
  • Retirement Score: Your retirement score shows a percentage representing the likelihood that your money will last through retirement. According to Personal Capital, a score of 50% to 80% “suggests you are on track, but it is important to understand and acknowledge that the portfolio does deplete in a meaningful amount of the projected scenarios.” A score above 90% means “there is relatively little to worry about and, most likely, you could afford greater spending now or it will be possible to increase spending over time.”
  • Graph Views: The graph above shows the portfolio based on an analysis of thousands of potential market returns. You can also view your accounts by asset location (i.e., Taxable, Tax Deferred and Tax Free.

The Retirement Planner also enables you to create multiple scenarios and then compare them. For example, one scenario may have you retiring at a traditional age, while another one has you retiring early. In one, you may include an estimate of social security, while in another one you exclude it. You could also change the assumptions on one scenario related to your effective tax rate, future inflation, or your life expectancy.

Once you’ve created a new scenario, you can then compare them side-by-side.

Savings Planner

The Savings Planner is three tools in one: Retirement Savings, Emergency Fund Savings, and Debt Paydown. Each enables you to set and track goals.

Personal Capital Savings Planner

Retirement Savings Planner

Here you can set an annual retirement savings goal. The planner tracks your actual savings throughout the year, including your contributions to retirement accounts like 401k and IRAs. It will also track any savings you have in taxable accounts.

Keep in mind that this planner and your Retirement Planner are connected. If you change your savings goal in one, it automatically updates the other.

Emergency Fund Savings Planner

For the Emergency Fund, Personal Capital totals the value of all of your linked bank accounts. It then recommends an Emergency Fund of 3 to 6 months worth of expenses based on the budget amount that you set. As with the retirement planner, any changes in your monthly budgeted amount here automatically updates your Budget in the Banking section of Personal Capital.

Debt Paydown Planner

Any debts, including car loans, mortgages and personal loans, will show up in the Debt Paydown planner. Note that credit card debt will also show up in the planner if there have been at least two interest transactions within the last 90 days. In other words, your credit cards will not show up here if you pay them off in full each month, thereby avoiding interest charges.

The planner will show each debt, along with its interest rate (APR), change in balance year to date, and current balance. It also displays a graph of the changing in debt balances in the current year.

Retirement Fee Analyzer

The retirement fee analyzer is, I must confess, my favorite part of Personal Capital. It’s easy to dismiss relatively “small” investment fees as unimportant. The problem, of course, is the effect fees have on your wealth over decades of time. A 1% advisor or mutual fund fee may seem small, but over time it can literally cost you hundreds of thousands of dollars.

Retirement Fee Analyzer

Personal Capital calculates a weighted average expense ratio for all of your linked accounts. Mine comes in at just 6 basis points–0.06%. That’s well below the average, and yet it will still cost me $17,865 over the next seven years according to the Fee Analyzer!

Fees matter–a lot. This tool by itself makes Personal Capital a must.

Investment Fee Checkup

The investment checkup evaluates your asset allocation and compares it to what Personal Capital recommends. Based on your investment profile, Personal Capital recommends an asset allocation. Here’s what it recommends for me, given my age, years to retirement and risk tolerance:

Personal Capital target asset allocation
Recommended Asset Allocation

My actual allocation has about 5% more bonds than what the above graphic shows. What’s interesting about this tool is that Personal Capital also shows you the historical performance of its recommended portfolio, future projections, risk & return and a comparison with your actual allocation.

If you want to follow the recommendation, Personal Capital provides a listing of those asset classes that need to increased, decreased and by how much.

Personal Capital FAQs

Is Personal Capital safe?

Yes. Personal Capital encrypts data with AES-256 with multi-layer key management, including rotating user-specific keys and salts. Further, no individual at Personal Capital has access to your credentials.
In addition, you must authenticate each device that accesses your account. You’ll receive an automated phone call, email or text message to confirm your identity. You can learn more about Personal Capital’s security here.

Is Personal Capital really free?

Yep. Its investment services are not, but its financial tools are completely free.

Will Personal Capital call me?

Yes. They use the financial dashboard as a marketing tool. I’ve spoken with their advisors in the past, although I’ve never used the investment services. If you don’t want them to call you, just tell them. They honored my request.

Do I have to invest with Personal Capital to use the dashboard?

No.

How much does Personal Capital cost?

The financial dashboard is free. If you do want to use their investment advisory services, the fees start at 0.89% for the first $1 million and go down to 0.49% for amounts over $10 million.

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Related: Best Financial Tools & Resources, Best Stock Tracking Apps, Best Quicken Alternatives, Best Mint Alternatives

The Paul Merriman Ultimate Buy and Hold Portfolio

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I first met Paul Merriman back in 2017. He was kind enough to come on my podcast to talk about what he calls the Ultimate Buy and Hold Portfolio. We’ve kept in touch over the years, and in fact we were just talking about a month ago. In this article we’ll dig into the details of his investing strategy.

Table of contents

Who is Paul Merriman?

Paul Merriman

Paul founded an investment advisory firm back in 1983. He retired in 2012, and in 2013 he started the Merriman Financial Education Foundation where he helps educate investors. He’s also published several books, including his most recent one, We’re Talking Millions!: 12 Simple Ways To Supercharge Your Retirement.

Over the years he’s developed what he calls the Ultimate Buy and Hold Portfolio. As you’ll see, it consists of 10 stock asset classes, each implemented with a low cost index mutual fund or ETF.

The Ultimate Buy and Hold Portfolio

Stocks

There are several versions of Paul’s Ultimate Buy and Hold Portfolio. We’ll spend most of our time looking at the version that has become famous over the years. It consists of the following 10 stock asset classes:

  • S&P 500
  • U.S. Large Cap Value (LCV)
  • U.S. Small Cap Blend (SCB)
  • U.S. Small Cap Value (SCV)
  • Real Estate Investment Trust (REIT)
  • International Large Cap Blend (LCB)
  • International LCV
  • International SCB
  • International SCV
  • Emerging Markets

Paul allocates the equity portion of a portfolio equally across these asset classes. For example, a portfolio of 100% stocks would see 10% allocated to each asset class. An 80/20 portfolio would have 8% allocated to each class, with 20% going to one or more bond funds (we’ll look at examples in a moment, but you can check out Paul’s portfolio implemented as a 80/20 portfolio on M1 Finance.)

Bonds

Merriman recommends three types of bonds for the fixed income portion of his strategy:

  • Intermediate term Treasury bonds (50% of total bonds)
  • Short term Treasury bonds and bills (30%)
  • Short term TIPS (20%)

I agree with much of what he suggests. He’s avoided high-risk bonds such as those issued from emerging market governments or troubled corporations. He’s also kept to a shorter yield curve and added some exposure to inflation protected securities.

If there’s any aspect I might adjust it’s to add more TIPS. If you believe inflation will be higher in the future than the market is predicting, TIPS are a way to place that bet. In contrast, if you think inflation will be lower than expected, Treasury bonds are the answer.

For those like me who have absolutely no idea, you split your bond portfolio equally between the two. That’s exactly what the David Swensen Portfolio does. The only caveat today is that TIPS start with a negative yield, and if you’re like me, that’s a hard pill to swallow. Nevertheless, that’s how I’ve implemented the Ultimate Buy and Hold strategy in M1 Finance.

How the Ultimate Buy and Hold Portfolio is Different

There are several aspects to note about Merriman’s investing strategy:

International Exposure: The portfolio allocates a full 50% of equities to international funds. This is unique among the portfolio’s I’ve evaluated. Most are less than 50%. The Warren Buffett Portfolio doesn’t allocate anything directly to international stocks. And Vanguard’s founder, Jack Bogle, saw no need to own international stocks.

I personally think international exposure is important. My portfolio allocates about 30% to global funds.

Small Cap Exposure: The Ultimate Buy & Hold portfolio allocates 20% to small cap stocks. It does so because history tells us that small cap companies out perform large cap companies over the long term. Over the past 50 years, small cap has outperformed large cap by more than 1%. A $10,000 investment beginning in 1972 would grow to more than $2.7 million if invested in small companies, compared to $1.5 million in large companies.

Source: Portfolio Visualizer

Value Exposure: Finally, Merriman’s strategy favors value investments over growth. Again, history tells the story. Although growth stocks have outperformed value recently, over the last 100 years, value has performed better in both large and small companies.

Historical Performance of the Ultimate Buy and Hold Strategy

The big question is how Merriman’s Ultimate Buy and Hold portfolio has performed. As you can see in the chart below (click the image to enlarge it), the portfolio has trounced the S&P 500 over the last 50 years.

The portfolio has returned 12.4% annually compared to 10.7% for the S&P 500. Note, however, that it comes with more risk. The standard deviation of Merriman’s portfolio, when rebalanced annually, weighs in at 18.5%, compared to 16.9% for the S&P 500. In other words, if you can handle the volatility, Merriman’s portfolio may be a sound option. Note too that by rebalancing monthly, you decrease both the returns and volatility.

Before we leave the performance of this investing strategy, it’s worth looking at how well it’s done over the last decade. As you can see, the portfolio has lagged the S&P 500 since 2010:

Source: Portfolio Visualizer

Why? Over the last decade large companies have outperformed small companies, growth companies have outperformed value companies, and U.S. companies have outperformed international companies. In other words, in just about every way that the Buy and Hold portfolio overweights has seen underperformance.

Much of this is the result of a low inflation, and easy money policy of the Fed and federal government. Massive borrowing and spending has sent asset prices soaring, which favors larger growth companies.

I don’t believe this undermines Merriman’s portfolio. The U.S. can’t borrow to infinity. But it does underscore that any investment strategy can lag the market for extended periods of time.

Building the UB&H Strategy

There are a number of ways to construct the Ultimate Buy & Hold Strategy. I’ve built one approach in M1 Finance using low cost index ETFs:

Keep a few things in mind. First, the above portfolio is 80% stocks and 20% bonds. One can easily change this to whatever stock/bond allocation is best to meet their investment goals.

Second, some of the chosen ETFs cover more than one asset class. For example, Vanguard’s small-cap ETF (ticker: VB) includes mid-cap companies. I think this is a perfectly reasonable approach to the UB&H strategy, but one could easily substitute a micro-cap ETF (e.g, iShares Micro-Cap ETF IWC).

Here’s what the asset allocation looks like in Personal Capital:

Finally, M1 Finance is ideal for this portfolio as it makes rebalancing easy. With M1, you can rebalance a portfolio with the click of a button.

The Simplified Ultimate Buy and Hold Portfolio Alternative

Paul Merriman and his team have released simplified versions of the UB&H portfolio. These are ideal for those who don’t want to juggle 10 stock asset classes! He has both a 4-fund and a 2-fund solution.

Source: https://paulmerriman.com/4-fund-combo-latest-recommendations/

4-Fund Ultimate Buy and Hold Portfolio

The Merriman 4-Fund Portfolio (see it here at M1 Finance) consists of the following four asset classes:

  • LCB (S&P 500)
  • LCV
  • SCB
  • SCV

This portfolio’s performance is similar to the 10-fund portfolio. It has averaged 13.8% over rolling 15-year periods since 1928. The S&P 500 has averaged just 11.0%.

2-Fund Ultimate Buy and Hold Portfolio

The 2-fund solution has performed even better. Its average performance over rolling 15-year periods is an amazing 14.5%. Here, however, some cautionary words.

The 2-fund portfolio bets everything on value investing. The two asset classes are SCV and LCV. In the short to medium term, this portfolio could significantly underperform the market, such as what the 3-fund portfolio seeks to replicate.

Final Thoughts

The 10-fund Ultimate Buy & Hold portfolio is an excellent way to potentially outperform the market without sacrificing diversification. It does, however, represent a more volatile approach to investing. Therefore, it’s not for everyone. At the same time, one can modify the portfolio to better suit individual approaches to investing.

My Research for this Article

Ray Dalio All Weather Portfolio

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The Ray Dalio All Weather Portfolio is designed to perform well in any economic cycle. Using risk parity to match asset classes to economic risk, the portfolio promises to perform well in any market with less volatility than traditional asset allocation models. In this article, we’ll examine the portfolio to see if it should be part of our investment strategy.

Ray Dalio All Weather Portfolio

Resources and Tools Mentioned in this Article:

Table of contents

Who is Ray Dalio?

Ray Dalio is a billionaire investor and hedge fund manager. Dalio founded Bridgewater Associates in 1975 and built it into the largest hedge fund in the world with $140 billion in assets under management. He is the author of Principles: Life and Work (2017). 

Dalio is a student of economic cycles. He recently produced a video describing how economic cycles work:

It’s his view on economic cycles that informs his All Weather Portfolio.

The Ray Dalio All Weather Portfolio

The Bridgewater Associates All Weather Fund

The All Weather portfolio dates back to 1996. It was the product of analysis by Bridgewater’s Bob Prince and Ray Dalio, among others. What they found is the economic cycles revolve around two things: Inflation/deflation and growth/contraction.

Source: https://www.bridgewater.com/research-and-insights/the-all-weather-story

As growth and inflation rise and fall, different asset classes either rise and fall. The goal of the All Weather portfolio was to gain exposure in roughly equal percentages of the various asset classes that perform well in each quadrant. At Bridgewater, the result was the following:

  • EM Credit: Emerging Market Debt
  • IL Bonds: Inflation-linked bonds (Tips, I Bonds)
  • Nominal Bonds: Bonds not linked to inflation (e.g., Treasury bonds)

Unlike a traditional asset allocation, the All Weather portfolio allocates just 25% or thereabouts to equities. The rest of the portfolio goes to various bonds and commodities, including gold. In this regard, in stands in sharp contrast to the 3-Fund Portfolio and the Warren Buffett Portfolio.

The above portfolio at Bridewater was available to corporate clients and pension funds. It was not available to the average investor, until recently.

The All Weather Portfolio

In 2016 Tony Robbins published Money Master the Game: 7 Simple Steps to Financial Freedom. For the book Robbins interviewed Dalio, who outlined the All Weather Portfolio in a way that average investors could mimic.

The portfolio consisted of the following asset classes:

  • 30% Stocks
  • 40% Long-Term Bonds
  • 15% Intermediate-Term Bonds
  • 7.5% Gold
  • 7.5% Commodities

According to Tony Robbins, here are the performance metrics for the portfolio from 1984 to 2013:

  • 9.7% annual returns
  • You would have made money 86% of the time
  • Average loss of just 1.9%
  • Worst loss was -3.9%
  • Volatility of 7.6%

The returns are remarkable given a volatility (standard deviation) of just 7.6%. By way of comparison, the S&P 500 has a standard deviation of more than 15%.

One way to implement this portfolio is to use the following ETFs:

  • VTI    30%
  • VGLT 40%
  • USCI  7.5%
  • GLD   7.5%
  • BIV     15%

I’ve created this portfolio in M1 Finance which you can check out here.

As noted earlier, this portfolio’s asset allocation is anything but traditional. Here’s a view of the allocation using Personal Capital’s Asset Allocation Tool:

Ray Dalio Portfolio Asset Allocation
Read my Personal Capital Review for more details on this free investment tracking app.

Backtesting of this portfolio is limited due to the commodities ETF. Still, we can see that it performed reasonably well since 2011 as compared to the Bogleheads 3-Fund Portfolio (80/20 allocation):

Note that it was neck-in-neck with the 3-fund portfolio until the recent post-Covid shock bull market. What’s noteworthy is that the Dalio portfolio’s standard deviation is just 6.23%, compared to 11.05% for the 3-fund portfolio. This in turn explains in part a Sharpe Ratio and Sortino Ratio much higher than the 3-fund portfolio.

In other words, the Ray Dalio portfolio performed better than the 3-fund portfolio on a risk-adjusted basis. At the same time, one can’t ignore that the 3-fund portfolio outperformed.

Long-term Bond Exposure

It’s hard to ignore the portfolio’s exposure to long bonds (and even intermediate term bonds) given current interest rates. If you believe that rates will rise, parking 40% of a portfolio in long-term bonds could be a recipe for disaster. Even Ray Dalio today questions why anybody would own bonds.

In his recent article, Why in the World Would You Own Bonds When…, Mr. Dalio described the economics of investing in bonds as stupid:

The economics of investing in bonds (and most financial assets) has become stupid.

He went on to explain why he believes bonds are in a bubble:

…If bond prices fall significantly that will produce significant losses for holders of them, which could encourage more selling. Bonds have been in a 40-year bull market that has rewarded those who were long and penalized those who were short, so the bull market has produced a large number of comfortable longs who haven’t gotten seriously stung by a price decline. That is one of the markers of a bubble.

Beyond the end of the 40-year bull run in bonds, Dalio goes so far as to say shorting bonds is a “relatively low-risk bet.”

If Dalio is right, and I believe he is, it calls into question the sustainability of the All Weather portfolio. Keep in mind that he recommended it to Tony Robbins in 2016. A lot has changed in the last five years.

2x Leveraged Ray Dalio Portfolio

It is worth asking whether it makes sense to used leveraged ETFs with the All Weather Portfolio. While I’m generally opposed to such measures, it’s common in risk parity portfolios to see leverage deployed to offset the low risk (i.e., low volatility) that these portfolios generate. The idea is to bring the volatility of the portfolio back in line with traditional asset allocation models, while enjoying slightly higher returns.

Creating the portfolio is easy in M1 Finance using ProShares ETFs. Here’s what it looks like:

2x Ray Dalio Leveraged All Weather Portfolio
Check out the portfolio at M1 Finance

Examining this portfolio in Portfolio Visualizer led to some interesting results. What follows is a comparison of this portfolio, the standard All Weather Portfolio, and a 3-fund portfolio using an 80/20 allocation:

It’s not surprising that the leveraged portfolio (Portfolio #1) outperformed the unlevered portfolio (Portfolio #2). What is more interesting is that it trounced the 3-fund portfolio (Portfolio #3) on both a total return basis and a risk adjusted basis (see both the Sharpe and Sortino ratios).

Pros & Cons of the Ray Dalio All Weather Portfolio

In the final analysis, the Rad Dalio All Weather Portfolio has several pros and cons:

Pros

  • Easy to implement with ETFs
  • Volatility lower than a “traditional” portfolio
  • Sharpe and Sortino ratios higher than a “traditional” portfolio

Cons

  • May underperform a 3-fund portfolio unless leverage is used
  • 50%+ allocation to intermediate and long-term bonds not ideal in current interest rate environment
  • Exposure to commodities and gold can underperform for long periods of time.

The Warren Buffett Portfolio Any Investor Can Copy

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Warren Buffett is best known as the CEO of Berkshire Hathaway and arguably the most successful investor of all time. What fewer people know is that he recommended a very simple portfolio that any investor can use. In fact, it requires just two mutual funds or ETFs. That’s it. We’ll look at this Warren Buffett Portfolio and how you can implement it in your 401k, IRA or taxable investment account.

2013 Berkshire Hathaway Letter

Every year Mr. Buffett writes a letter to the shareholders of Berkshire Hathaway (full disclosure, I own shares of Berkshire). His letters are a goldmine of investing wisdom. For our purposes, it’s what he said in the 2013 letter that’s so important.

He first noted how he and his business partner, Charlie Munger, have made a career out of analyzing businesses. Most investors, however, don’t have this experience. As he said in the letter, most “investors, of course, have not made the study of business prospects a priority in their lives. If wise, they will conclude that they do not know enough about specific businesses to predict their future earning power.”

Not to worry. As Buffett noted, “I’ve got good news, the non professionals, the typical investor, don’t need this skill.” He explained:

“In aggregate, American business has done wonderfully over time and will continue to do so (though, most assuredly, in unpredictable fits and starts). In the 20th Century, the Dow Jones Industrials index advanced from 66 to 11,497, paying a rising stream of dividends to boot. The 21st Century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.”

That gives as a glimpse into the Buffett Portfolio. Let’s now take a deeper look at what he recommends.

The Warren Buffett Portfolio

The Warren Buffett Portfolio consists of just two investments. The first is an index fund that tracks the S&P 500. Buffett recommends putting 90% in an S&P 500 index fund. He specifically identifies Vanguard’s S&P 500 index fund. Vanguard offers both a mutual fund (VFIAX) and ETF (VOO) version of this fund.

He recommends the other 10% of the portfolio go to a low cost index fund that invests in U.S. short term government bonds. Vanguard here too offers a mutual fund (VSBSX) and ETF (VGSH) version.

Although Buffett is famous for picking stocks, he has put this simple 2-fund portfolio to use. He has advised the trustees who will manage his wife’s investments after his death to use this portfolio.

Warren believes the “trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.” (Source: 2013 Berkshire Hathaway Letter to Shareholders, p. 20).

Now, that last part is important. He didn’t say that this portfolio will do better than every other portfolio. He said it will do better than those who employ high fee managers.

What About International Stocks?

One glaring absence from the portfolio is an international stock fund. In fact, the lack of direct international exposure is what distinguishes Warren Buffet’s portfolio from the Bogleheads’ 3-Fund Portfolio. Buffett doesn’t explain this aspect of the portfolio, but there are at least three plausible explanations.

First, while the S&P 500 index includes companies headquartered in the U.S., they do business across the world. Buy one measure, foreign sales among the 500 largest companies accounted for about 29% of their $12 trillion in total sales according to a recent report. As such, the S&P 500 has significant exposure to international markets.

Second, the regulatory and political framework in the U.S. is conducive to business investment. While far from perfect, regulations in the U.S. hold public companies to a higher standard of disclosure and internal controls.

Third, international funds have underperformed U.S. companies over the past four decades. There have been 10-year periods where international stocks have outperformed (2000 to 2009, for example). On the whole, however, they’ve served to hold back the performance of a portfolio, as we’ll see in more detail next.

Performance

The performance of the Buffett Portfolio tracks closely the S&P 500. That’s not surprising given that it has a 90% allocation to the index. Still, it’s worth understanding how it has performed, particularly compared to other portfolios.

First, here’s a chart from Stock Rover comparing the performance of the Warren Buffett Portfolio to the 3-Fund Portfolio. Both use a 90/10 stock to bond allocation. The 3-Fund Portfolio has a 50% weighting to U.S. total stock market and 40% to international equities.

It’s not surprising that Buffet’s portfolio has outperformed over the past 13+ years. U.S. stocks have outperformed international stocks.

Let’s now compare these to portfolios going back to 1987. To do that, we’ll use Portfolio Visualizer. I assumed a $10,000 initial investment and $500 monthly contributions, adjusted for inflation. Here are the results:

Portfolio #2, which is the Buffett Portfolio, significantly outperformed the 3-fund portfolio. The difference in the CAGR (compound annual growth rate) may not seem significant (17.43% vs 16.23%), but over time its impact is huge. What’s amazing to me is that the standard deviation, a measure of volatility, is actually a bit lower in the Buffett portfolio, and the worst performing year actually hit the 3-fund portfolio harder.

In other words, the Warren Buffett Portfolio returned better results with less risk. Maybe the Oracle of Omaha knows something about investing after all.

The Warren Buffett Portfolio in Retirement

One important question is whether Buffett’s portfolio is suitable for retirees. In all my research, I’ve never found an investment advisor who recommends a 90/10 portfolio once you enter retirement. And for me, such a portfolio is just too aggressive.

Nevertheless, there is research analyzing this very question. Professor Javier Estrada published a paper entitled, Buffett’s Asset Allocation Advice: Take it . . . with a Twist. He examined Buffett’s asset allocation from the perspective of a retiree. Specifically, he looked at different asset allocations using Warren Buffett’s two funds, the S&P 500 and the short term government bonds.

He looked at portfolios ranging from 100% stocks all the way down to 30% stocks, with the rest in bonds. In total he evaluated 86 different retirement scenarios over rolling periods beginning in 1900. What he found was that out of those 86 retirement scenarios, three and a half percent failed. And by failure he meant that the retiree ran out of money before 30 years.

In his analysis, the only asset allocation that had no failure rate was the 60/40 portfolio. But all the allocations he examined did reasonably well, except when you got really low on equities, and then the failure rate jumps.

He further examined two “twists”, or modifications, one could make to Buffett’s portfolio. Basically, the twists determine whether a retiree withdrawals from the stock or bond portion of the portfolio. Generally, when stocks are up you withdraw from the stock fund, when they are down you pull from the bond fund.

Here’s his conclusion:

“Buffett’s asset allocation advice is sound and simple, and yet many retirees may balk at the thought of holding such an aggressive portfolio. If that is the case, the two twists considered here may help a little, but probably not enough. However, those retirees who find a 90/10 portfolio acceptable are likely to find that, with the unsubstantial additional effort of observing the performance of stocks and implementing the first twist discussed, they may improve the performance of their portfolios.”

M1 Finance

I’ve started using M1 Finance to invest our credit card rewards. Unlike many who spend their rewards on first class travel, we save and invest our credit card cash back. To date our balance is over $26,000. 

I’ve implemented the Buffett Portfolio in M1 Finance, and you can check it out here.

7 Best IRA Accounts to Open in 2022

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My goal for this website is to help readers become better investors and prepare for retirement. To do this, some of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own.

Opening an IRA account is an important step towards saving for retirement. The best IRA accounts have low fees, a wide array of investment options and tools that make investing easy. 

Table Of Contents
  1. Summary of Best IRA Accounts
  2. How to Choose the Best IRA Account
  3. Mythodology
  4. FAQs

Summary of Best IRA Accounts

Betterment

Best Robo for hands-off investors

I met the founder of Betterment, Jon Stein, about 10 years ago. Since then, I’ve followed Betterment closely. It is one of a few robo advisors I recommend for IRA accounts. 

With Betterment, the only decision you have to make is how much you want invested in stocks and how much in bonds. Betterment even helps you make that decision through a series of questions. Once you set your stock and bond allocation, Betterment does the rest. It automatically allocates your portfolio across about a dozen stock and bond ETFs.

One downside of Betterment is that, like all robo advisors, there is a fee. Betterment’s fee is 25 basis points (0.25%) for what it calls Digital Investing. The cost goes up to 40 basis points (0.40%) with Premium Investing, which gives you unlimited calls and emails to Betterment’s team of Certified Financial Planners. You can also purchase flat-fee advice from one of Betterment’s CFPs. These fees are in addition to the costs of the underlying ETFs. 

Pros:

  • Well established robo advisor
  • Reasonable costs 
  • Excellent portfolio construction
  • Flexible Portfolios
  • Retirement planning tools
  • Very easy to use
  • Human advisors for an extra fee, including flat-fee advice

Cons:

  • Fees over and above the cost of ETS

Account Types: Traditional IRA, Roth IRA, SEP IRA, Inherited IRA

Account Fees: 0.25% to 0.40%

Transaction Costs: None

Required Minimum: None

Investing Tools: Automatic portfolio construction, diversification, rebalancing, and dividend reinvestment

Promotions: Up to 1 year of waived account fees

Fidelity

Best Overall IRA Account

Fidelity is a full service broker that powers many of the 401k plans and other retirement accounts. As an IRA provider, it gives investors access to virtually every mutual fund and ETF or stock available in the market. It does so without account fees, and its minimum investment requirements, if any, are low.

It spends $2.5 billion a year on technology, enabling it to offer excellent tools. One example is an account aggregation feature called Full View. Powered by eMoneyAdvisor software, you can aggregate all of your financial accounts, including those held outside Fidelity, into the tool. It gives you a dashboard of all of you finances. While I do take advantage of this feature, Personal Capital is a better option in my view.

Fidelity also offers its own version of a robo advisor, called Fidelity Go. Unlike Vanguard’s Digital Advisory Service, it requires no account minimum and is free for accounts up to $10,000. For accounts between $10,000 and $49,999, it costs $3 a month. For accounts $50,000 and up it costs 0.35% per year.

Finally, I’ve found Fidelity’s customer service to be very good. It also has physical locations, which I find helpful. It’s not often that I need to speak with a Fidelity representative in person, but it’s nice to know that I can if needed.

Pros:

  • Excellent customer service
  • Fidelity invests heavily in technology
  • Wide range of account types
  • Wide range of investment options, including low cost index funds
  • Robust investing tools
  • Low costs 
  • Cash management (debit card, credit card, online bill pay)

Cons:

  • Website can be difficult to use
  • No Roth Solo 401(k) for business owners
  • Robo Advisor services (Fidelity Go and Go + are more expensive than alternatives)

Account Types: Traditional IRA, Roth IRA, SEP IRA, IRA Rollover, Inherited IRA

Account Fees: None

Transaction Costs: None

Required Minimum: None

Investing Tools: Stock ETF or mutual fund research and market analysis tools, Full View

Promotions: None

Vanguard

Best for Low Cost Advisory Services

I’ve been a Vanguard client for decades. I’m a huge fan of their mutual funds and ETFs. Of course, you don’t need to open a Vanguard account to invest in their funds. In fact, you can invest in Vanguard funds through any of the IRA brokers listed here.

For those who know they want to invest in only Vanguard funds, however, it is a good option for opening an IRA. It’s also a good option if you want to use its advisory services. It offers both a digital advisory service for 25 basis points ($3,000 minimum) and a human based advisory service for 30 basis points (minimum $50,000). Otherwise you can invest on your own for just the cost of the Vanguard mutual funds and ETFs.

Pros:

  • Excellent mutual funds and ETFs
  • Digital and human powered advisory services

Cons:

  • Website and tools could be better
  • Advisory services have minimum investments
  • Vanguard mutual funds have minimum investments (typically $1,000 or $3,000)

Account Types: Traditional IRA, Roth IRA, SEP IRA, IRA Rollover, Inherited IRA

Account Fees: None unless an advisory service is used

Transaction Costs: $0

Required Minimum: $1,000 to $3,000 for many of Vanguard’s mutual funds, no minimum for ETFs, $3,000 for its Digital Advisory Services, $50,000 for its Personal Advisory Services.

Investing Tools: Asset allocation tool, investment comparison, screen & analyze investments, retirement planning tools, education savings tools.

Promotions: None

Wealthfront

Best for hands-off investors

Wealthfront is one of three robo advisors to make our list of the top IRA account options. It’s very similar to Betterment. You simply select your stock and bond allocation and Wealthfront takes care of the rest. 

It has a similar cost structure at 25 basis points plus the cost of the underlying ETFs. It does have a few differences in terms of portfolio construction. Most notably it includes a REIT index fund in retirement accounts, whereas Betterment does not. Wealthfront automates investing. It helps you create a personalized portfolio, and then rebalances it automatically as markets fluctuate. 

Wealthfront also offers a retirement planning tool it calls the Path. The tool enables users to connect outside accounts, and then it evaluates your retirement readiness.

Wealthfront Path
Wealthfront Path

For those in retirement, Wealthfront offers a number of cash management features. These include accounts with up to $1 million in FDIC insurance, online bill pay, mobile check deposit and no account fees. It also offers a Visa debit card with over 19,000 free ATMs. Note, however, that its interest rate is well below the best online bank options.

If you have taxable accounts at Wealthfront, it also offers automated tax-loss harvesting and direct indexing.

Pros:

  • Easy to use
  • Low cost
  • Excellent portfolio construction
  • Automatically rebalances portfolio
  • Automatically harvests tax losses in taxable account

Cons: 

  • It does charge a fee over and above the ETFs
  • Limited portfolio construction options

Account Types: Traditional IRA, Roth IRA, SEP IRA and IRA Rollover

Account Fees: 0.25%

Transaction Costs: None

Required Minimum: $500

Investing Tools: Personalized portfolio construction, automatic rebalancing, automatic tax loss harvesting

Promotions: Get the first $5,000 managed for free

M1 Finance

Best Free Robo-Advisor

M1 Finance earns our top award for the best free robo-advisor IRA account. It earns this honor for several reasons. 

First, it charges no account fees or transaction fees. While I like other automated services such as Wealthfront and Betterment, M1 Finance is the only one that doesn’t charge a fee for its services. Second, it enables you to build what it calls pies. You can think of a pie as a portfolio that you can include just about any ETF or stock that you want.

You can use pre-constructed pies that are excellent for retirement investing. In fact, I’ve created a 3-fund retirement portfolio in M1 Finance that anyone can use. I’ve also created several more complex portfolios to consider. 

With M1 Finance, managing an IRA is easy. You can rebalance a portfolio with the click of a button. And for those that want to invest in individual stocks, you can easily create a pie that contains the stocks of your choice or add individual stocks to a pie that is invested also in index ETFs like the portfolios above.

Creating the pies, while easy, does take some effort. As such, M1 Finance is not as hands-off as other robos, such as Betterment and Wealthfront (see below).

Account Types: Traditional IRA, Roth IRA and SEP IRA

Account Fees: $0

Transaction Costs: $0

Minimum Deposit: $100

Investing Tools: Easily create customized portfolios or use portfolios created by M1 Finance, auto-invest settings, auto-rebalance portfolio

Promotions: $30 bonus when you fund your account with $1,000+

Want help with a 401k Rollover? Capitalize will walk you through the process for free. They do all the leg work to move your 401k to your existing IRA or a new one of your choosing. Not sure where to open an IRA? Capitalize can help you with that, too.

Merrill Edge

Best for hands-on investors and Bank of America clients

I recently opened a rollover IRA at Merrill Edge. It’s part of Bank of America, making it ideal if you bank at BofA. Merrill Edge can be a great way to have all of your accounts under one umbrella. Similar to a Fidelity or Vanguard, you can invest in just about anything through Merrill Edge. 

It also offers a robust set of tools for research and analyzing investments, including tracking your progress towards retirement. It does offer its version of a robo advisor, called Merrill Guided Investing. The downside is that it’s more expensive than Betterment or Wealthfront.

Pros:

  • Low Cost 
  • Excellent investment tools
  • Integrated with Bank of America accounts 

Cons:

  • No automated rebalancing
  • Merrill Guided Investing more expensive that other robo advisors

Account Types: Traditional IRA, Roth IRA, SEP IRA, IRA Rollover, Inherited IRA

Account Fees: None for self-directed IRA accounts. Merrill Guided Investing costs 0.45% for online only and 0.85% for online with an advisor

Transaction Costs: None

Required Minimum: None for self-directed IRA; $1,000 for Merrill Guided Investing; $20,000 for Merrill Guided Investing with an advisor

Investing Tools: Research and retirement planning tools

Promotions: Up to $2,500 for new accounts depending on value. This promotion occurs annually for a limited time.

Ally Invest

Best for hands-off investors

Ally, the financial institution best known for online banking, brings the same excellent website and mobile app to an investment platform. It offers both self-directed IRAs and its own version of a robo advisor called Managed Portfolios. It also comes with a host of tools to analyze your investments and your portfolio. 

For self-directed IRAs, there are no commissions or account fees. The Managed Portfolios option requires just a $100 minimum. Unlike other robo advisors, Ally doesn’t charge a fee. However, it does require you to keep 30% of your portfolio in cash, which is a non-starter for retirement investing. As such, I don’t recommend Ally Invest’s Managed Portfolios unless you have a specific reason for keeping so much in cash.

Pros:

  • Virtually free 
  • Easy website to navigate 
  • Excellent tools
  • Excellent mobile app

Cons: 

  • Managed Portfolios keep 30% in cash 

Account Types: Traditional, Roth IRA and Rollover IRA

Account Fees: None

Transaction Costs: None

Required Minimum: None to open a self-directed account, $2,000 for margin accounts, and $100 for a Managed Portfolio account.

Investing Tools: Streaming charts, profit/loss calculator, market and company snapshots, probability calculator, watchlists, market data and option chains.

Promotions: $50 to $3,500, requiring a deposit of transfer of $10,000 to $2 million or more. Ally Invest also credits transfer fees, up to $150, when moving accounts from another broker.

How to Choose the Best IRA Account

Don’t focus on what you will invest in

One of the big misconceptions about opening an IRA account is that you should focus on what you want to invest in. When I started investing 30 years ago, this was an important consideration. I couldn’t go to Fidelity and buy Vanguard funds. Over time, you could but there were fees.

Today, you can invest in virtually anything  at just about any broker with few if any transaction costs. As a result, when opening an IRA account, the focus shouldn’t be on what you want to invest in. Instead, focus on how you want to invest.

Focus on how you will invest

There are basically three types of investors. There’s the hands off investors, who simply wants to set it and forget it. There’s the hands-on investor who wants to control every detail of the portfolio. And then there are those who want to be able to control their investments to some degree, but at the same time automate things like rebalancing the portfolio.

Understanding the type of investor you are will help you pick the best IRA account.

3 Types of Investors

1. Hands-Off Investors

The best IRA account options for hands-off investors are M1 Finance, Betterment and Wealthfront. Strictly speaking, Betterment and Wealthfront are the most hands off types of IRA accounts in our list. As noted above, you simply set the stock and bond allocation and they do the rest. The downside is that they both charge fees for the service of 25 to 40 basis points. While that may not seem like much, over a lifetime of investing it can easily add up to hundreds of thousands of dollars.

With M1 Finance, you do have to decide on the pie you want to use. They’re easy to create and there are pre-built pies that are ideal for long term retirement investors. Once you select one, it functions very similar to a robo advisor. 

Each contribution you make is divided among the individual investments in your pie according to the allocation you set. In addition, you can rebalance the portfolio with the click of a button. At the same time, however, you get great control over your investments. For example, if you wanted to add the stock of a single company to a three fund portfolio, you could do so in a matter of seconds. You could then allocate whatever percentage of that portfolio you want.

Either way, M1 Finance, Betterment and Wealthfront are all good options for hands-off investing.

2. Hands-On Investors

A traditional broker is certainly a strong option in our list that includes, Vanguard, Fidelity, Merrill Edge and Ally Invest. While they each have their own pros and cons, for most IRA investors it frankly doesn’t matter. You can buy any investment you want at any of these brokers and they all function in a relatively similar ways.

Alternatively, hands-on investors could use M1 Finance. As noted above, you can construct the pie or multiple pies as you see fit. You control the rebalancing and at the same time M1 Finance tools make rebalancing very easy.

3. Control with Automation

As you’ve probably guessed by now, there’s only one that fits into this category, and that’s M1 Finance. If I were starting as an investor today, I’d probably use M1 Finance. I use it today to invest all of the cashback credit card rewards that we receive.

Understanding the Impact of IRA Account Fees

Investment fees are critical to the long term performance of any portfolio. Most IRA account brokers charge no account fees or transaction fees. The one exception are robo advisors, including automated investing platforms at traditional brokers. Fees for these services range from about 0.25% to 0.45%.

It would be a mistake to dismiss these fees. While robo advisors are a good choice for those wanting totally hands-off investing, it’s important to understand how these fees can effect your wealth over time.  

Let’s assume you invest $500 a month over a 45 year period (we’ll ignore inflation). The account would grow to approximately $2.6 million with an 8% return (thank you, compounding!). If we reduce that return assumption by 25 basis points to account for the robo advisor fees, the account balance drops by more than $200,000 after 45 years.

While it’s certainly true that $200,000 45 years from now will be worth a lot less than it is today, it’s still a lot of money. This doesn’t rule out Betterment, Wealthfront or other managed portfolios. But it should be a consideration as you make your choice.

Mythodology

My analysis stems from holding accounts at each of the brokers on the list, with the exception of Ally Invest. I’ve had a Rollover IRA, Roth IRA, Traditional IRA, SEP IRA or an Inherited IRA at Wealthfront, Vanguard, Fidelity and Merrill Edge. I’ve held taxable accounts at Betterment and M1 Finance.

Beyond my own experience, I focus on fees and functionality. Fees are always critical, and how each broker works is important. You want to match your own personal approach to investing with the right IRA account. I also considered each broker’s website and mobile app, as well as their investing tools.

FAQs

Where is the best place to open an IRA?

For the vast majority of investors M1 Finance is an ideal option. It’s virtually free and gives access to just about every mutual fund, ETF or stock out there. In addition it has excellent tools to manage your portfolio, including automated rebalancing.

Are there any free IRA accounts? 

Yes. Most brokerage accounts today offer IRA accounts with no account fees and no transaction costs. One exception would be robo advisor type services, such as Betterment, Wealthfront or Vanguard’s Digital Advisory Services. These tools, while making investing easier, typically cost 25 to 45 basis points, in addition to the costs of the ETFs.

Can I open an IRA account if I have a 401k?

Yes. Having a workplace retirement account does not disqualify you from opening an IRA.
Your income, marital status, and other factors, however, could determine whether you can deduct traditional IRA contributions from your income, or whether you can contribute to a Roth IRA.

The Ultimate Investment Tracking Spreadsheet (Just Updated)

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Keeping tabs on your investments can be a headache. That’s particularly true, if like me, you have a number of different accounts. While my favorite investment tracking app is Personal Capital, another tool I use is a free investment tracking spreadsheet. 

Investment Tracking Spreadsheet
Investment Tracking Spreadsheet

I’m going to walk through the spreadsheet in this article and video (see below). You can get a free copy of the spreadsheet here. It’s extremely easy to use and will help you track your investments, asset allocation and mutual fund fees. And as you’ll see, it’s a great tool when it comes to rebalancing your portfolio. 

It consists of three sheets–Asset Class, Holdings and Stocks.

Investment Holdings Spreadsheet

The first step in using the spreadsheet is the Holdings sheet. This is where you should start. The data that I have in here is just demo data. This is not my actual portfolio, though, I do own many of the mutual funds that are listed here. But this is where you start and you want to enter your portfolio. And you could include mutual funds, ETFs, stocks, whatever you’d like. 

Investment Spreadsheet
Investment Holdings Spreadsheet

The color coded cells in the columns for Account, Symbol (i.e., Ticker) and Shares are the cells where you need to enter information. All of the other cells contain calculated values based on the Ticker.

For each fund we need to designate an asset class (Category column). The drop-down contains most major asset classes, but you can add more. For example, you could add categories for REITs, emerging markets or small cap stocks. (The video below explains how to do this.) 

Next you’ll enter the number of shares that you own for each investment. The spreadsheet pulls in the price using a Google Finance function, and the total value is then automatically calculated based on a simple formula. It works the same with the fund expense ratio. A Google Finance function pulls in the data and the weighted expense ratio is just a simple formula. 

Individual Stock Spreadsheet

The spreadsheet works with individual stock holdings as well. The original version of this spreadsheet, linked to above, contains a separate sheet for stocks. In the current version I use, I just incorporate them into the Holdings sheet. Google Finance functions pull in the same data for stocks as it does for mutual funds (except there’s no mutual fund expense ratio).

In terms of asset allocation, you have two options. You can classify stocks just like we classify mutual funds. I could, for example, classify my holdings of Apple and Berkshire as US stocks. Alternatively, you could create a separate classification called Stocks and separate them from mutual funds and ETFs for purposes of asset allocation. That’s what I’ve done because my Apple holdings have grown so much it skews my asset allocation plan (that’s a good problem to have!). 

Asset Class Spreadsheet

Once you have all of your investments into the holdings sheet, we can then now go to the Asset Class tab. This is where the magic happens. There’s a lot going on here and I want to walk through it for you. 

Asset Allocation Spreadsheet
Asset Allocation Spreadsheet

This is the target asset allocation that we’re using in the spreadsheet. It’s in the My Target column. You’ll want to put in your own target asset allocation. If you add other categories beyond what I have in the spreadsheet, you’ll want to add rows for each here. The best asset allocation for you is going to depend on your age, debt, investment goals, time horizon, risk tolerance, and other factors.

Once you have your target asset allocation, the sheet compares it to your actual allocation. Next you’ll see the difference between the actual portfolio value and what the target is. Now you’ll notice that some of these cells are red and some are white. Red cells mean that the difference between our target and actual allocation is greater than the Threshold we’ve defined in the next column.

As a general rule, I set the threshold for rebalancing at 20% of the allocation for each asset class. For example, an asset class with a 25% allocation would have a threshold of 5%. An asset class with a 10% allocation would have a 2% threshold. This is based on research by Dr. Gobind Daryanani, CFP (See Opportunistic Rebalancing: A New Paradigm for Wealth Managers, Journal of Financial Planning, January 2008).

The significance of the threshold is that once an asset class exceeds that threshold, it turns this cell red. Now it’s up to you to rebalance your portfolio, always keeping tax consequences in mind. Of course, you can set the threshold to whatever you want. To help with rebalancing, I’ve added a column to my current spreadsheet to show the amount by which each asset class is over or under my target allocation.

Video

In this video I walk through how to use the spreadsheet. Keep in mind that I’m regularly updating the spreadsheet to add new features, so the current version may be slightly different than what you see in the video.

Final Thoughts

I use this investment tracking spreadsheet primarily to rebalance my portfolio. It’s just much easier than any other stock tracking app. To monitor my asset allocation, investment fees, performance, and retirement goals, I rely on Personal Capital, but there are several really good investment tracking apps available.

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