Wealth: how to grow it, protect it and pass it on

Investing is great.

In fact, if you have made it this far after reading the previous articles in the series, you should already be fairly clear on:

1. Investing from scratch: where to invest your money.
2. Types of assets you can invest in according to their role in the portfolio.
3. How to buy assets: investment vehicles.
4. Investment platforms: where to buy investment vehicles or assets.
5. Risks and guarantees of investing.
6. My investment system.
7. Wealth: how to grow it, protect it and pass it on. (This is the one you are reading).

But investing is not the final goal.

The final goal is to build wealth, which is not exactly the same thing.

Investing is an action: you buy funds, stocks, gold, bitcoin, property or whatever.

Managing wealth is something else: deciding what you do with all of that over time so that it grows, does not get destroyed along the way and, when the time comes, can pass to other people without becoming a nightmare.

Because yes, wealth is not just about accumulating, but about three things:

1. Growing it.
2. Protecting it.
3. Passing it on.

And in this article I am going to try to put those three phases in order. Not from the point of view of a tax advisor, because I am not one, but from a much simpler perspective:

The perspective of a person who wants their money to work, who does not want to bet everything on one card, and who understands that, when wealth becomes significant, improvisation is not an option.

What wealth is

Wealth is everything you own, minus everything you owe.

As simple as that.

If you have:

• Money in an account.
• Funds.
• Stocks.
• Gold.
• Bitcoin.
• A home.
• A company.
• A garage.
• A pension plan.

All of that forms part of your wealth.

But if you also have:

• Mortgage.
• Loans.
• Debts.
• Cards.
• Credit lines.

That also counts, only negatively.

That is why, when someone says “I have a €300,000 house” but owes the bank €250,000, they do not have €300,000 in wealth. They have a share of it. And the rest is debt.

This seems obvious, but we do not always have it clear. Especially in countries like Spain, where for decades we have confused wealth with housing.

Owning a house can be part of your wealth, of course. But your wealth should not depend exclusively on a house.

Nor on a company.

Nor on bitcoin.

Nor on stocks.

Nor on anything specific.

Because if all your wealth depends on a single piece, what you have is not a strategy, but rather a bet.

The phases of wealth management

In the same way that I would not create a portfolio with the same composition starting from €3,000 as from €100,000, you do not need to manage wealth in the same way with €5,000 as with €500,000.

This is important.

When you have little wealth, your priority should be to grow it.

When you already have something significant, your priority starts to mix with preserving it.

And when wealth is high or you have a family, in addition to protecting it, another layer appears: how to pass it on.

Put simply:

• If you have little, you need to grow.
• If you have quite a lot, you need not to screw it up.
• If you have a lot or you have heirs, you need to plan.

The problem is that many people want to protect wealth they do not yet have. And others do the opposite: they keep taking huge risks when they already have enough not to need to gamble so much.

Both mistakes are common.

And expensive.

To avoid them, let us look at each phase in more depth.

#1. Growing wealth

The first phase is the most obvious: making your wealth grow.

This is where the three routes I mentioned in the first article of the series:

1. Earn more.
2. Spend less.
3. Invest the difference.

Of the three, the most powerful is usually the first.

Not because investing is not important, but because to invest you need capital. And capital has to come from somewhere.

If you earn €1,300 a month and save €50, you can invest those €50. Better than nothing, of course. But the impact will be limited for quite some time.

However, if you manage to increase your income and keep your expenses under control, your investment capacity changes completely.

That is why, although this series of articles is about investing, I would tell you that the first investment should almost always be in your ability to generate income:

• Training.
• Skills.
• Business.
• Better clients.
• Better position.
• Better offer.
• Better product.
• Side project.

Because if you improve your ability to generate income, then you can invest more.

And that is where investing starts to do its job.

Investing multiplies, but it does not replace

This idea is important:

Investing does not replace income generation. It multiplies it.

If you have no income, investing is very difficult.

If you have income but save nothing, it is difficult too.

If you have income, save and invest sensibly, then the game begins. And the sooner you start, the better.

Not because you are going to get rich in two afternoons, but because time is the main ingredient of compound interest.

Significant wealth does not usually appear all at once. It is built through accumulation.

Month by month.

Year by year.

Contribution by contribution.

This is pretty unsexy, I know. But after many years investing, I am clear that it works better than trying to find “the next Nvidia” every two months.

In my case, in case it helps, I have combined two jobs for as long as I can remember. It has taken a lot of leisure time away from me, but in exchange it has allowed me to generate wealth at 2x speed. And to retire at 42.

Growing wealth is not about taking any risk

Here you have to avoid falling into a very tempting trap, one I fell into at the beginning in DeFi: when you want to grow, you think the solution is to take on a lot of risk.

And sometimes it is, but not always.

Because a young person, with no family responsibilities, good income and plenty of time ahead can afford an aggressive portfolio.

More equities.

More bitcoin.

More exposure to even more volatile assets.

But a person with children, unstable income, a large mortgage and little safety cushion should not copy that same portfolio.

Even if it looks less epic on X.

The real risk is not just the asset’s risk; your situation also plays a role.

Bitcoin can be a reasonable investment for someone with high income, a large cushion and a twenty-year horizon.

And it can be a screw-up for someone who is tight on liquidity and may need that money in six months.

The asset is the same, but the real risk is not.

#2. Protecting wealth

The second phase is preserving or protecting, whichever verb you prefer.

And here things change. Because, when you are building wealth, you think a lot about returns. But when you start to have it, you should also think about protection.

Because there comes a point where the risk of losing does not compensate for the possible extra return.

And I am not just talking about market drops. Protecting wealth means avoiding several types of disasters:

• Poor diversification. And its cousin: excessive concentration in a single asset.
• Lack of liquidity.
• Tax problems.
• Poor asset custody.
• Possible blocking of your capital.
• Legal risks.
• Emotional decisions.
• Excessive debt.
• Not being clear about what would happen if you were not here tomorrow.

This last one is a drag to think about, I know, but it is part of the game. I will explain later why it matters.

Diversification

Some people confuse diversification with fear.

I do not see it that way.

Diversifying means accepting that you are not a fortune teller.

You may have a very clear thesis on bitcoin, on index funds, on real estate or on your company.

Perfect.

But however clear your thesis is, it can go wrong.

Or it can go well, but take much longer than you thought.

Or regulation can change.

Or your life can change.

Or something can happen that simply was not in your plans.

That is why a reasonable portfolio should not depend on a single thing going well.

In my case, I prefer to combine assets with different functions:

• Funds for long-term growth.
• Bitcoin for growth and as an alternative reserve.
• Gold as a safe haven.
• Liquidity for peace of mind.
• Some real estate exposure, although you already know it is not my favorite part.
• And fewer and fewer individual stocks.

It is not the perfect combination —that does not exist—, but it is a portfolio that fits me well, adapts to me and is therefore not hard for me to maintain, even if I gradually modify it a little every year.

Liquidity can also protect

Some people see money in an account as idle money. And, in part, it is.

But it is also peace of mind.

Liquidity is useful for not having to sell assets at a bad time.

If a sharp market drop comes and you need money because you do not have a cushion, you may have to sell funds, stocks or bitcoin at a loss.

Not because you want to, but because you need to. And that is exactly, exactly what has to be avoided.

That is why the safety cushion does not compete with investing.

It sits separately and serves to protect the system. And yes, it reduces potential returns, but it increases the chances of maintaining the system you yourself have built and are comfortable with.

In any case, two notes here:

• You can keep liquidity in an interest-bearing account that helps fight inflation.
• The cushion should cover between 6 and 24 months of your usual monthly expenses, no more. So, over time, it will be a fairly low percentage of your wealth.

Be careful with debt

You have to know how to use debt. Because it can be a tool, but it can also be a trap.

For example, a reasonable fixed-rate mortgage on a primary residence may make sense, but taking on heavy debt to buy volatile assets —including crypto—, not so much. No matter how much it looks like a great move to borrow at 5% so you CAN earn 12%.

It might be… or it might not. And sink you. There are probabilities both ways.

Debt amplifies:

• If everything goes well, you earn more.
• If everything goes badly, you lose more.

That is why, as your wealth increases, the question is whether it is worth taking on debt and collateralizing assets or whether it is better to stay put.

In my case, less and less.

Taxation: a boring part that matters far too much

Taxation is a pain in the ass, seriously. I know very few people who like it. But the problem is that it affects wealth enormously.

You will see:

• Selling an asset today is not the same as selling it in three years.
• Receiving dividends is not the same as accumulating them inside a fund.
• Selling a primary residence and reinvesting is not the same as selling another type of property.
• Inheriting in one autonomous community is not the same as inheriting in another.
• And having everything in your own name is not the same as having at least minimally planned how it is organized.

I am not going to go into detail here because it would be absurd.

• First, because I am not a tax advisor.
• Second, because it depends on each case.
• And third, because tax rules and laws change constantly (just ask those who took on huge mortgages to buy tourist rental apartments and then were not allowed to rent them out).

But I would tell you one thing: when your wealth starts to become significant, having a good tax or financial advisor you can turn to is one of the most important investments you can make.

Not to do weird or illegal things, but to get information and avoid making expensive mistakes.

Because you will realize that the problem is almost never paying taxes, but paying them because you planned nothing and then finding out that, with small adjustments, your tax bill would be very different.

Custody and control

Really, for me, the heart of wealth protection.

It has several aspects, so let us start with the easy part: knowing where everything is and who has access.

This applies to everything:

• Bank accounts.
• Brokers.
• Funds.
• Cryptocurrencies.
• Wallets.
• Deeds.
• Insurance.
• Will.
• Contracts.
• Debts.
• Keys.
• Tax documentation.

As you can see, putting all this together in an Excel or a Word sounds like great fun. But it needs to be documented, because if something happens to you tomorrow:

• Would someone know where ALL your wealth is?
• Would they know which platforms you have money on?
• Would they know if you have bitcoin?
• Would they know how to access it?
• Would they know what to do?

The most common answer is no, so I am sure you know that you have a problem.

With all intermediaries, of course, but especially with crypto, because it is very possible there are none.

In fact, I am taking advantage of the topic to explain the second important point of wealth protection: the assets you invest in. And where you do it.

Because if you have bitcoin in self-custody and nobody knows how to recover it, that bitcoin is not part of your estate. It is part of limbo.

In fact, it is estimated that between 11 and 18% of the bitcoins currently in circulation are part of this limbo. Between 2 and 4 million BTC. Look at the current BTC price and do the math, because it is enough to make you tremble.

Many of these cases happen because of a lack of planning and documentation.

And yes, you may think that staying in fiat money is safer because you partly avoid this risk. But what actually happens is that you make other risks possible, such as your accounts being blocked. Or the difficulty of transferring money wherever you feel like.

Bitcoin is one of the best wealth protection tools. LLCs are another one, which I may talk to you about in a future article. For now, let us move on to the third phase

#3. Passing on wealth

As I was saying earlier, the third phase is the one nobody really feels like dealing with:

Inheritance.

But if you have children, a partner, family or simply want to decide what happens to what is yours when you are gone, you should think about it.

You do not need to have millions, not even close. It is enough to have something to put in order.

Because the more orderly it is, the fewer problems you leave behind. And the thing is, a poorly planned inheritance can generate:

• Family conflicts.
• Tax problems.
• Loss of wealth.
• Forced sales.
• Assets that nobody knows how to manage.
• Indivisible assets that are difficult to divide.
• Blockages.
• Debts that appear when nobody expected them.
• Inaccessible cryptocurrencies.
• Companies that end up in no man’s land.

I know this from personal experience, as I have had several of these problems too.

Inheriting is not just receiving money

An inheritance is not just “something falls into my lap” —a solution— but it also can be a problem:

• A debt.
• You can inherit a home with encumbrances.
• A share of a house shared with relatives with whom you would not even want to share an elevator.
• A company you do not know how to manage.
• A property that needs renovation.
• An awkward asset, such as completely worthless land in depopulated Spain.

That is why, if you are thinking about leaving wealth behind, it is worth thinking about “how”.

Leaving liquid money is not the same as leaving three indivisible properties. Especially depending on the number of heirs.

Leaving funds that are easy to sell is not the same as leaving an SME with no instructions.

Leaving bitcoin in an ETF is not the same as leaving self-custodied bitcoin without anyone knowing where the seed phrase is.

So, as the time approaches, consider making certain moves that make life easier for your heirs.

I am working on it.

A will is not for the rich

This is a good one. And completely absurd.

I am telling you this, again, from experience, because in my family we have never been rich, not even remotely. And that is why none of our inheritances had a will. Which has led to incredibly complicated inheritances, disputes and loss of contact between close relatives.

A will is not only for the rich; it is a tool for what I mentioned earlier: putting things in order.

Making a will does not mean anything is going to happen, but that whatever happens, the general rules will be well defined. And you do not pass your problems on to others along with the inheritance.

Giving during your lifetime

Another possibility is to pass on part of your wealth during your lifetime.

It can make sense in some cases, such as if you want to help your children buy a home, finance a project, organize a family business or bring forward part of an inheritance.

But it is not something to do without thinking, because it can have important tax, family and wealth implications.

Also, giving too early can leave you in a weak position. And this is relevant because your wealth also has to protect you.

That is why, before giving, it is worth asking yourself:

• Can I afford it?
• What tax impact does it have?
• Am I harming other heirs?
• Will I need that capital later?
• Am I solving a problem or creating another one?

Again, consult a good advisor. Let them inform you about the cost and tax instruments while you answer the previous questions.

You put all the answers —yours and the advisor’s— into the cocktail shaker and, finally, decide.

In my case, for example, when my son was born I preferred to create an account for him at Indexa with index funds to which we make weekly contributions directly in his name.

This means that at 18 that money will be his, without inheritance or gifts, but until then it is under my control. In case I see he is a loose cannon and it is better to manage it another way.

Wealth and freedom

For me, wealth makes sense because of just one word:

Freedom.

Not necessarily absolute freedom. The kind they sell you of living on an island drinking coconuts while your assets work for you. That one is great for selling courses, but then life usually turns out to be less Instagrammable.

I am talking about real freedom, the kind that lets you choose better:

• Decide what you spend your time on every day.
• Reject a bad client or change jobs.
• Work less.
• Spend more time with your family.
• Do more sport.
• Be able to move. Even to another country.
• Not sell during a crash.
• Go through a rough patch and still sleep peacefully.
• Help someone close to you.
• Make decisions with room to maneuver.

That is real wealth, not a number in an app.

Because the opposite of freedom is not slavery, but dependence. On others. And I have always tried to avoid it.

My way of looking at wealth management

After everything I have seen and lived through, I am quite clear that I do not want wealth that is hard to manage.

I do not want to depend on tenants.

I do not want to have twenty platforms.

I do not want to need three spreadsheets to know where my money is.

I do not want to watch the market every day.

I do not want my family to have to decipher a hieroglyph if something happens to me tomorrow.

I want something simpler:

• Liquid assets that compound little by little.
• Enough diversification.
• Low maintenance.
• Reasonable taxation.
• Reliable platforms.
• And a system I can maintain for many years.

As I have been telling you, it is not perfect, but it works for me and I can execute it (I have been doing it for years).

That is no small thing.

How to start putting your wealth in order

If I had to summarize all this in a simple process, it would be this:

#1. Calculate your net worth

Make a list of everything you own.

Then another one with everything you owe.

The difference is your net worth.

#2. Classify your assets by function

Do not look only at how much each thing is worth.

Look at what it is for:

• Growth.
• Stability.
• Safe haven.
• Income.

A primary residence, for example, does not work the same way as an S&P 500 ETF.

Even if both are part of your wealth.

#3. Detect dangerous concentrations

Ask yourself:

Do I have too much weight in real estate?

Too much in my company?

Too much in bitcoin?

Too much in shares of a single company?

Too much in idle money?

You will not always have to correct it immediately, but it is worth knowing as soon as possible.

#4. Review your liquidity

How many months can you get by without income?

If the answer is “few” (you know, between 6 and 24, depending on your level of peace of mind), your priority is not to optimize returns but to build this cushion.

#5. Simplify platforms

Having accounts everywhere is not convenient; it complicates your life.

Only the necessary, well-chosen platforms.

That said, keep in mind the amount covered by each platform’s guarantee fund, because you may be interested in making the jump and opening another once you reach the limit.

#6. Document what matters

Where the money is.

Where the investments are.

Where the deeds are.

What insurance you have.

What debts exist.

Which keys are important.

What to do with each thing.

A spreadsheet is more than enough.

#7. Make a will if it makes sense

And if you have a partner, children, a home, a company or minimally relevant wealth, it probably makes sense.

Do not leave it for “later”, because that is a very corporate way of saying never.

#8. Review once a year

You do not need to look at your wealth every week, but an annual review does seem almost mandatory to me.

The usual data:

• Income.
• Expenses.
• Assets.
• Debts.
• Returns.
• Risk analysis.
• Changes in taxation.
• Or in inheritance planning.

One morning a year can save you a lot of problems.

That said, I do check every day or every two days how the important assets are doing. One thing does not take away from the other.

Conclusions

Investing is important, but it is only one part of the first phase of wealth management, of which there are three:

• Generating wealth: this is where investing comes in, together with work income and expenses.
• Protecting wealth: where, again, investing becomes important, together with other tools such as companies.
• Passing on wealth: this is pure management.

That is why managing wealth is a fairly broad matter, answering questions such as:

• What am I building?
• What risks am I taking?
• How do I protect what I already have?
• What happens if I need liquidity tomorrow?
• What happens if I am gone?

That is why the goal should not be only to earn more returns. That is just the beginning. It should be to build wealth that gives you more freedom and less dependence.

One that grows over time. That is not destroyed by a bad decision. That does not keep you awake at night. And that, when the time comes, you can pass on without leaving a problem for others. Because in the end,investing is only one (very good) tool. But wealth management is the system. And freedom is the goal.

Next steps

This was the final article in the series, but if you want to review some concepts, I invite you to continue with one of the previous ones:

1. Investing from scratch: where to invest your money.
2. Types of assets you can invest in according to their role in the portfolio.
3. How to buy assets: investment vehicles.
4. Investment platforms: where to buy investment vehicles or assets.
5. Risks and guarantees of investing.
6. My investment system.
7. Wealth: how to grow it, protect it and pass it on. (This is the one you are reading).