If you are reading this, chances are, you have been searching for an effective way to manage your investments, especially in these times of uncertainty.
When it comes to investment management, two renowned platforms are Wealthfront and Personal Capital. These two provide great options for investment, but how do you choose the one that best meets your needs?
The investment sector can be a bit overwhelming for some, and with these two providing similar options, deciding the better of the two is anything but easy.
Thankfully, this article cuts through the confusion by providing insights into both platforms in this Personal Capital vs Wealthfront review.
Let’s begin!
Personal Capital Vs Wealthfront: Investment Management
Personal Capital
Personal Capital Advisors Corporation offers three distinct investment services based on how much you plan to invest initially. These are:
- Private Client services which are offered to investment assets with a value of more than $1 million
- Wealth Management services offered to investment assets with a value between $200,000 and $1 million
- Investment Services offered to investment assets up to $200,000
Personal Capital operates a customizable investment strategy based on a customer’s general financial situation and personal goals. These can include medium-term investment goals that suit the individual’s current situation, such as financing their education or purchasing a home.
The company uses a tactical weighting approach alongside the indexing of United States equities. This allows it to maintain an evenly weighted exposure in stocks and sectors.
The investment portfolio created is based on the MPT or Modern Portfolio Theory, which includes a diverse range of about 100 stocks for tactical weighting and tax optimization. Also included in the portfolio are small-cap index ETFs.
The portfolio is always rebalanced to ensure that asset classes are kept within your allotted target. They are also monitored daily for proper processes.
Getting a Personal Capital Advisors Corporation portfolio means that you will have six asset classes in your investment portfolio:
- International stocks
- US stocks
- International bonds
- US bonds
- Cash
- Alternative assets, such as REITs or Real Estate Investment Trusts, gold, and energy, help to hedge against inflation
With Personal Capital, you aren’t required to deposit your investment funds. Instead, your investment account is held in Pershing Advisor Solutions, made up of over $1 trillion in clients’ assets. With this, you can check on your account through the Pershing online platform on your dashboard. It is possible to also receive e-statements from both Pershing and Personal Capital.
Wealthfront
Wealthfront offers its services to new investors and provides improved investment options to existing investors by using MPT or Modern Portfolio Theory while following a passive investment strategy.
The company doesn’t aim to outperform underlying investment benchmarks. Instead, it tries to match them. This is possible because your portfolio is invested in low-case index-based ETFs.
Typically, Wealthfront spreads a customer’s portfolio across as many as 10 asset classes, which include:
- Emerging market stocks
- US stocks
- US government bonds
- Corporate bonds
- Dividend growth stocks
- Foreign developed market stocks
- Real Estate
- US Treasury Inflation-Protected Securities
- Natural Resources
- Municipal Bonds on taxable accounts
Wealthfront has developed a financial planning system that combines flexibility and accessibility called Path. Path enables new users to create a strategy using financial tools by entering variables, such as your yearly expenses, desired income, age, and more. The Path dashboard recommends a strategy while also showing you a projection of how the plan would look in the future. If you are not pleased with the strategy, you can change it until you get one that works for you.
Once all of this has been set up, the next step is to deposit your money, and the service will automatically invest it according to your investment strategy.
In all, Wealthfront provides you with superior analysis that requires no effort on your path. Since customers can be sure of effectiveness and accessibility, Wealthfront has gained a reputation as one of the top Robo-advisors in the nation.
Personal Capital Vs Wealthfront: Features
Personal Capital
With Personal Capital, customers can access the following benefits and features:
Accounts
- Individual as well as joint taxable accounts
- Traditional, rollover, SEP, and Roth IRAs
- Trusts
- 529 college plans
- Advice only employer-sponsored retirement plans
Advice
Access to a financial advisor is available on the paid version. Individuals who invest an account minimum of $200,000 will get access to two financial advisors
Minimum Initial investment
For the free version of Personal Capital, there are no minimum investment balances. However, the investment management variant requires an investment of at least $100,000.
Tax
Personal Capital uses numerous strategies to minimize income taxes generated from investments. These strategies include tax-loss harvesting and tax allocation. It also uses tax efficiency strategies like not investing in mutual funds as they are more likely to generate capital gains.
Wealthfront
Accounts
- Individual as well as joint taxable accounts
- Traditional, rollover, SEP, and Roth IRAs
- Trusts
- 529 college plans
- Advice only employer-sponsored retirement plans
- Automatic dividend reinvestments and periodic rebalancing
Minimum initial investment
Wealthfront is designed to cater to the budding investor and that means you only need a minimum investment of about $500.
Tax & PassivePlus
All accounts offered by Wealthfront have tax-loss harvesting. Portfolios are rebalanced using dividend reinvesting and index funds to minimize capital gains. Wealthfront also Uses tax outcomes via tax location that places income-generating assets in tax-sheltered plans.
PassivePlus is a feature designed to raise returns without increasing risks. To do this, it uses rule-based and time-tested strategies to invest your funds beyond index funds.
Transfers
Instead of liquidating your fund immediately to cash, Wealthfront uses a system where transfers are gradually done to lower tax implications. It does this by recommending the sale of incompatible investments like mutual funds, as these don’t line up with the investment methods that Wealthfront uses.
Risk Parity Fund
Wealthfront has a mutual fund made available to account holders with balances of over $100,000. This fund is suitable only for taxable accounts.
The purpose of the Risk Parity fund is to increase your risk-adjusted returns through an improved asset allocation strategy based on a large portion of the markets.
Speaking of risks, learn how you can prepare your portfolio for a recession here.
Personal Capital Vs Wealthfront: More Features
If you are still unsure which of these investment platforms are best suited for you, there are additional features listed in this section that can make the difference.
Personal Capital
Personal Capital’s platform has investment and budgeting applications. This service is suited to those who get the wealth management service. The free version of this platform includes financial goal and budgeting settings. It does this by incorporating strategies to aid you to reach your investment goals. This also includes providing support to your retirement financial planning, reports on spending and income, as well as managing your investments.
Personal Capital has a fee analyzer that allows users to recognize any hidden investment fees. It also recommends alternative investments to reduce or eliminate the fee. You can get an investment check-up, which is a tool that helps analyze your portfolio and offers advice on how to make improvements to easily reach your goals.
The retirement planner also comes with a Retirement Calculator. It helps in retirement planning by tracking your progress against the goals you have made. It is also possible to calculate your rental income, pensions, and Social Security benefits. You can use the retirement planner for other things such as budgeting for a college education.
Wealthfront
Unlike Personal Capital, Wealthfront doesn’t offer budgeting tools. Instead, it provides features and free financial tools that are not available on Personal Capital.
First, is the Path tool, which is essentially a dashboard that enables users to track and plan all their major financial objectives. These include purchasing a house, college saving, or creating a retirement plan.
For college savings, Path can analyze how much a college education will cost, the amount of financial aid available, and the amount you need to invest and save. Users can choose between creating a new 529 college savings plan and using an existing plan.
Purchasing a home can be quite stressful. This is even more difficult when it is finding a home that fits within your budget. There are various factors to consider, and Path can be useful here.
The retirement plan is not left out. Many people don’t concern themselves with retirement planning because it seems too far away in the future. However, the earlier you begin planning, the better things can get.
Path can calculate your future retirement using your current circumstances and changes to your situation. Such changes could be a new addition to your family, choosing to retire early, purchasing a home, or promotions.
If you choose to link your various financial accounts to Path, the tool can seamlessly analyze your financial habits. Path is designed by a team of PhDs to forecast factors, such as inflation and social security, to provide users with an extensive overview of retirement situations.
