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3 Ways to Use the Personal Capital Dashboard During Market Volatility

From everyone at Personal Capital, we hope you, your friends, and family are staying safe and healthy during the COVID-19 situation.

The current bear market is impacting everyone’s finances. Although drops and volatility can be unsettling and frightening, it’s important to remind ourselves that market cycles are normal and to be expected, and having a long-term financial plan is more important than ever. These are uncertain times and much of what’s happening is out of our hands, so focusing on what we can control is the best thing we can do for our finances.

Here are three ways you can use the Personal Capital dashboard to help you stay on track during extreme volatility in the market:

1. Use the retirement planner to stay focused on your long-term plan.

The Retirement Planner lets you evaluate your retirement portfolio and its chances for success. The tool uses your real inputs — including annual saving, desired retirement spending, time horizon, expected portfolio return, and many others — to give you a real-time projection of your long-term portfolio value, supported spending, and when you can reasonably retire. In other words, the Retirement Planner is a guiding hand that helps you understand how you’re tracking towards your financial goals, and importantly, what you can do to best achieve them.

So, how does the Retirement Planner take market cycles and downturns, like we’re experiencing now, into account when projecting future portfolio value?

There is no way to predict the market, but we can use historical returns to make an educated guess about the future. The planner looks at your portfolio’s asset allocation — the mix of equities, fixed income, alternatives and cash — and makes projections based on how each has performed in the long run, taking market cycles into account. We also use “Monte Carlo simulations” which allow us to generate a stream of hypothetical future returns based on the historical annual return and standard deviation of all assets linked to the dashboard, reduced by 1% to be more conservative. We also adjust for your expected cash flows into or out of the portfolio in a given year. We then repeat this simulation 5,000 times in order to generate a range of outcomes.

The Bottom Line: Use the Retirement Planner to Stay Focused on the Long-Term.

Try not to get too wrapped up in the day-to-day declines in your portfolio during these uncertain times – it can be too much for any investor to check their losses too often. Instead, use the Retirement Planner to stay focused on your long-term goals. Are there things you can do, like delay taking Social Security or adjusting your budget for an upcoming home renovation, to improve your chances of success? Stay focused on the factors you can control, and know that the Retirement Planner takes market cycles into account when projecting your chances of success.

2. Assess your risk tolerance and asset allocation with Investment Checkup.

Is your asset allocation right for you? Have the last couple of weeks made you rethink your level of risk? Personal Capital’s free Investment Checkup tool will allow you to assess your asset allocation, and will suggest a target allocation for you based on your financial goals. The Investment Checkup tool also allows you to review the risk in your portfolio – if you are taking on too much investment risk, then you’ll get suggestions on how to achieve similar levels of performance while reducing risk.

It’s extremely important to understand what risk tolerance actually is though, because people often conflate risk tolerance with their feelings about current market conditions. Risk tolerance is stable over time and shouldn’t fluctuate based on what the market does. For new investors, sometimes it does take a bear market to realize the amount of risk they can endure for a potential gain.

3. Know where you stand with the Personal Capital dashboard.

“When facing market volatility in the short-term, one of the most important and powerful things investors can do is to keep focused on the long-term. The dashboard tools put the sustainability of your long-term financial plan in context.” -Steve Nykamp, Personal Capital CFP®

The Personal Capital dashboard is a tool designed to help you always know where you stand when it comes to your money, in real time. You can aggregate your investment accounts, bank and credit card accounts, retirement plans, and more to get a holistic view of your money. During these uncertain times, it’s important to have a full picture of what you have and what you owe. You can also use the dashboard to track transactions to see where you might be able to make efficiencies in your budget. The savings planner feature will also help you to evaluate if you have sufficient emergency funds to cover expenses to avoid making any big changes to your portfolio while the markets are down.

It sounds cliché, but knowledge really is power when it comes to making financial decisions, especially when everything seems uncertain.

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The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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