I've been thinking about this for years, and the truth is that many make the same mistake: they start investing without knowing what their time horizon is. It's like sailing without a compass.

The key is understanding that not all investments are suitable for all timeframes. If you need the money in less than a year, put everything into deposits or short-term bonds. End of story. But if we're talking about long-term investments, clear examples would be stocks or even cryptocurrencies, because you have plenty of time to withstand the volatility.

Now, here’s the important part: volatility and liquidity. They are the two factors that define everything. The higher the volatility, the greater the potential return, but also more risk. It’s pure mathematics. A government bond gives you security but minimal gains. Stocks or crypto can multiply your capital, but you’ll have to endure brutal drops along the way.

That’s why financial planning is essential. You can’t invest for a house in a year if you don’t have the capital. You need to be realistic. The short term (less than 1 year) is for immediate needs. The medium term (1-4 years) allows for a bit more risk. And the long term (5+ years) is where you can really put volatile assets without getting scared.

A practical example: if you build a long-term portfolio, you could have 95% in global stocks and 5% in gold. But if it’s short-term, you invest 40% in liquidity, 50% in bonds, and just 5% in equities. The difference is huge.

What many don’t understand is that the real secret lies in compound interest. If you invest 150,000 euros for 3 years with simple interest at 3.5%, you get 165,750 euros. But with compound interest, you reach 166,307 euros. It seems small, but multiplied over years and with larger amounts, it’s the difference between retiring comfortably or not.

The real problem is patience. You see the market fall and want to run. But if your strategy is well thought out and the asset is solid, those drops are opportunities. Whoever sold Apple shares during COVID missed out on the subsequent recovery.

For long-term investments, more concrete examples: indices like the S&P 500 or Nasdaq 100 are classic options. They diversify risk and have historically generated good returns. You can also combine them with bonds to reduce volatility, depending on your profile.

And here’s the important part: you don’t need a huge capital. Long-term investing is precisely what allows you to capitalize with little money. Start with what you have and let time and compound interest work their magic.

What almost no one mentions is that you can combine a long-term strategy with short-term tactics. You have 80% in a fund or index that you don’t touch, and use 20% for specific trades. The best of both worlds.

But watch out: the golden rule is to stick to your plan. Poor capital allocation and lack of patience are the two killers of investments. If you decided on long-term, hold on. If you decided on short-term, don’t let FOMO take over. Discipline, always.