How to Grow Your Wealth: A Guide on Where to Invest Money to Multiply It

The Fundamentals You Need to Know Before Investing

The question of what can I invest my money in to multiply it has no single correct answer. There are multiple paths to profitability, each with its own risk and reward curve. Before selecting your financial instruments, it is essential to understand two guiding principles: the risk-return relationship and the power of time.

Understanding the risk-return equation

There is a popular belief that it is possible to get rich without taking risks. The reality of the financial market completely dispels this illusion. Assets that offer higher potential returns are invariably accompanied by greater price fluctuations. However, this does not mean that all volatile assets are the same.

This is where the Sharpe Ratio comes into play, a tool that allows you to compare which asset provides more return per unit of risk assumed:

Sharpe Ratio = (Asset Return) / (Asset Volatility)

To illustrate: imagine two funds. The first generates 12% annually with a variability of 9%, while the second produces 18% with 25% volatility. At first glance, the second seems superior. However, applying Sharpe to the first yields 1.33 (12÷9), while the second yields 0.72 (18÷25). This reveals that the first instrument extracts more value from your capital facing similar risk levels.

An important warning: this ratio only works when comparing assets within the same category. Short-term bonds, for example, will show artificially high ratios due to their minimal volatility, which would distort cross-comparisons.

The factor of time as your most powerful ally

No one builds wealth overnight without risking their entire patrimony on a single (strategy that almost always fails). The true capital multiplier is time combined with disciplined reinvestment.

Two principles act here simultaneously:

First, starting early exponentially amplifies results. Each additional year you invest allows returns to generate their own returns.

Second, compound interest transforms your portfolio. If you invest 100 euros at 10% annually, after the first year you have 110. If you reinvest that return, in the second year you generate 121, not 120. This growth accelerates permanently, becoming your value-generating machine.

Risk management: what you should ask yourself

Before revealing where to specifically invest your capital, meditate on these fundamental questions:

How much am I willing to lose? This question is more important than “How much do I want to earn?”. Identify amounts you can manage emotionally without panic. Never bet more than you could afford to lose completely.

Do I have discipline or just intuition? Successful investors rarely succeed by “hunch”. Their real advantage is a systematic method they never abandon, even when their emotions scream otherwise.

Do I recognize my psychological limits? Greater volatility correlates with higher profit potential, but also generates more anxiety. Choose instruments suited to your temperament.

Tools like automatic stop-loss orders (stop-loss) and take profit (take profit) are not luxuries but necessary shields against impulsive decisions.

Concrete options: what can I invest my money in to multiply it

Stocks: the most visible and accessible investment

Stocks represent fragments of the share capital of real companies. As a shareholder, you have two sources of profitability: price appreciation and dividends distributed by the companies.

Advantages of investing in stocks:

• Abundant public information about well-known companies (Tesla, Apple, Amazon)
• Allow diversification by sector, geography, and company size
• Historically have generated the highest sustainable returns
• You are a real owner of parts of tangible businesses

What complicates this investment:

• Price manipulations occasionally occur, especially affecting small investors
• Financial reports may contain fraud or inaccuracies
• Requires constant monitoring of corporate news

Commodities: investing in the fundamentals

Since ancient times, natural resources (oil, gold, soy, coffee, palladium) have been the foundation of trade. Commodities originally served as the basis for futures contracts, the first financial derivatives.

Advantages of this segment:

• 24-hour trading with enormous volumes
• Effective utility for de-correlating portfolios (gold protects against inflation)
• Excellent arbitrage opportunities
• Gold specifically acts as a refuge against currency depreciation

Significant disadvantages:

• Very high volatility influenced by multiple geopolitical factors
• Hinder long-term strategies
• Prices can temporarily disconnect from fundamentals

Index funds: simplified access to multiple assets

An index is a basket of assets grouped under a specific criterion, usually geographic or sectoral. The Spanish Ibex 35, the German DAX 30, or the US S&P 500 group the main companies of their economies.

Benefits of investing in indices:

• Rapid and cost-effective penetration into entire geographies or sectors
• Automatic and broad diversification
• Notably reduced fees
• Reduce your need for individual analysis

Clear limitations:

• You cannot select which companies to include or exclude
• Composition reviews are slow, missing current trends
• Follow the crowd, do not lead movements

Cryptocurrencies: the emerging asset with the greatest potential

Cryptocurrencies have transcended the category of speculation to establish themselves as a legitimate asset class, already exceeding one billion dollars in global market capitalization. Bitcoin, Ethereum, and thousands of other tokens represent a fundamentally different innovation from previous instruments.

These assets originate from blockchain technology and operate without banking intermediaries. They emerged in 2009 with Bitcoin as a response to the monopoly of central banks, evolving into an ecosystem of decentralized applications and financial services.

Reasons to consider cryptocurrencies:

• Superior historical performance compared to any traditional asset in the last 50 years
• Offer thousands of projects allowing fully personalized portfolios
• Independence from political and monetary interference
• Demonstrate resilience against inflationary cycles (Bitcoin rose along with global inflation)

Inherent risks:

• Extreme volatility compared to any other instrument
• Require additional education to understand why tokens have value
• Market still under regulatory evolution

Forex: the oldest and most deep market

Forex is the exchange of currencies, where price differences between pairs like EUR/USD or GBP/CHF are traded. Percentage movements are tiny, so leverage is used to realize gains.

Positive features:

• The largest market in the world with no counterparty risk
• Operates 24/5 (Monday to Friday without closing)
• Allows significant leverage
• Very high liquidity

Challenges:

• You must necessarily use leverage to generate returns
• Many macroeconomic factors affect currency pairs daily

Investment methodologies based on your time horizon

Buy and Hold: Warren Buffett’s patience

The Long Only strategy favors buying valuable assets and holding them long-term. It is based on Value Investing: analyzing whether the current price reflects true value compared to future projections. The highest returns come to those who withstand full market cycles.

Long/Short: offsetting positions

This advanced technique combines long (long) and short (short) positions simultaneously to neutralize volatility. Example: if you fear airline stocks will fall due to rising fuel prices, you can buy oil simultaneously. Gains from one instrument offset losses from the other, generating stability.

Day Trading: quick execution within a session

Day trading involves opening and closing trades within the same trading day, capturing rapid movements. Its main requirement is dedication: constant screen monitoring and precise execution. It is the most demanding methodology in terms of time and focus.

Multiplying investment through CFDs: accessible financial derivatives

Contracts for Difference (CFDs) are derivatives whose value depends exclusively on the evolution of their underlying asset. These instruments enable operations that would be impossible otherwise: short positions, high leverage, instant access.

If you suspect a certain asset will make a significant move in the short term, CFDs potentially amplify your gains. Specialized platforms offer competitive leverage even in complex market conditions, allowing you to exponentially boost your initial capital.

The personalized path to multiply your money

After reviewing options, Sharpe ratios, strategies, and time horizons, a truth emerges: there is no universal magic formula. The best way to invest your money depends entirely on how you structure your own portfolio according to risk tolerance, time horizon, and available knowledge.

The final recommendation is experimental: gradually test each asset class in small amounts. Get familiar with its behavior, adapt to its cycles, observe how you react emotionally. Only then, having gained experiential knowledge, should you expand your exposure to those instruments where you feel genuinely confident. True learning does not come solely from theoretical study but from disciplined and reflective practice.