I founded an automated investing service that manages over $3 billion, and here are the 11 best pieces of financial advice I can give you

Betterment

I spent years working as a consultant, advising the world’s largest banks.

Now, I run Betterment, an automated investing service that’s working to realize the potential of technology to make each of us great at managing our own money — providing personalized advice and planning. My money management tips aren’t complicated, and they work for anyone who’s investing for a happy future.

1. Start with your goals

When you invest, avoid blindly putting money into the market; instead, think about what you want to accomplish in the future in terms of specific goals.

These are things like retirement, a home down payment, your child’s education, making your money last your lifetime, or simply building wealth for the long term.

By having clear, concrete goals, you can put together a properly risk-managed investment plan, which can increase the likelihood that you’ll reach your goals.

2. Make sure your portfolios are taking on the right level of risk

It’s important for your portfolio to take on the right level of risk for your goal’s time horizon because it will increase your chance of reaching your goal.

For example, if you have a 30-year retirement goal, then it generally makes sense to invest in a 90% stock/10% bond portfolio.

This higher-risk portfolio is designed to return more over this long time period, even though it may have ups and downs along the way.

3. Use low-cost ETFs

Invest in exchange-traded funds (ETFs) with low expense ratios that let you keep more of what you earn. Over time, high fees can significantly erode portfolio returns. In fact, the Council of Economic Advisers estimates that unnecessary fees drain $17 billion a year from IRA investors’ accounts.

For individual investors who want to build a portfolio, basic stock and bond index ETFs tend to be cheaper than the average mutual fund in the same asset class, and lower minimum investments.

Consider the price difference between Vanguard’s Total Stock Market ETF (VTI) and equivalent mutual fund (VTSMX). They both follow the same CRSP US Total Market Index, but there is a significant cost difference. VTI has an expense ratio of 0.05% and VTSMX has an expense ratio of 0.17%, according to Morningstar. You can invest in VTSAX, which costs 0.05%, but only if you invest a minimum of $10,000 in that fund alone.