After the success of her first book “Invest in you”, Natalia de Santiago now publishes “Invest with little”, a practical guide with the keys and steps to irrigate our money and make it grow and multiply in the long term. De Santiago, an engineer by training and an expert in finance, recalls in an interview with ABC that there are people with modest incomes who achieve financial independence thanks to proper management of their money and expenses. In times of inflation, De Santiago believes that investing well is more necessary than ever to prevent rising prices from ‘eating’ the savings we have in the bank.
Where do I start to invest if I do not have much financial knowledge?
You have to start investing little by little, it is not necessary to do it all at once. You can start with monthly contributions to take callus and get used to the world of investment. The most suitable products for the common saver are investment funds because there is a huge offer, for all pockets and for all types of people. In addition, they are highly regulated and supervised by the CNMV. These funds also guarantee security, diversification and have advantageous taxation. The first step is to invest for the long term with money that you will not need in the next few years; the next should be choosing which funds to start with.
How do I know which background is the most suitable for my profile?
The ideal would be to go to an independent advisor who tells us which investment fund is best for us. If not, you can always opt for the bank’s advisers, although they are not independent. Here I encourage you to compare in the same way that we do when we are going to buy a car. On the internet there are pages with ratings and opinions on mutual funds. We must do the searching for ourselves; the ideal is to compare the offers of three different entities. We must remember that nothing happens if we make a mistake, since Spanish taxation allows money to be transferred from one fund to another at no cost, it is an operation that does not cost even a phone call.
Is it possible to invest with little money?
Nowadays it is possible to invest with little money, since the same democratization process has taken place as with everything else. Investment has been democratized in the same way that it has happened with decoration or fashion. Nowadays, there are investment products that do not require a minimum investment and that allow you to make regular contributions of 10, 15, 20 euros or the amount that each one decides. The perseverance in the investment makes the returns accumulate and the profitability picks up speed: a few end up adding up and if we have time in our favor, the investment can appreciate a lot and lead to an interesting amount for the future.
Is it mandatory to invest if we want to have a good retirement?
The truth is that almost yes. If we leave the money in the bank thinking that it is a way to avoid risks, in the end it will be ‘eaten’ by inflation. Added to this is the fact that those who warn that pensions are going to be worse in the future are right. In other words, if our savings are reduced and, in addition, we have to cover an increasing part of our retirement, investment becomes imperative. On the other hand, as long as interest rates remain so low, guaranteed products are not going to give anything. Therefore, you have to invest and learn to do it so as not to get an unnecessary scare.
What is the secret to prevent inflation from ‘eating’ all our savings?
Investment is one of the few tools we have at our disposal to prevent inflation from ‘eating’ our savings. The other option is to save more and more and spend less and less, that is, to cover this difference ourselves or to get our salary raised enough to cover it, a strategy that is often not so easy.
The other trick to combat inflation is buying a home as a long-term investment?
Yes, historically, housing has protected us very well against inflation and can help us, but it is dangerous to see the primary residence as an investment, since it is a basic necessity. However, even if it is not an investment, it is a great way to save in the long term and a tremendous advantage in retirement because it reduces expenses in retirement. Buying a house, especially with a mortgage, protects against inflation and is an advantage for retirement. You can also invest in brick and buy a house to rent it, do real estate crowdfunding or invest in real estate funds. Real estate investment is an alternative and we also talk about it in the book, yes.
Do you recommend taking out a pension plan for retirement?
Pension plans are a very good savings vehicle for retirement, but they are being discouraged by political, legal and taxation decisions. Pension plans are being stripped of the tax incentive they used to have and there is a lot of uncertainty surrounding it, since the incentive is being passed on to company plans. If you don’t have an individual pension plan, I think it’s not the ideal time to sign up for one. There are already other products such as investment funds or PIAS (Individual Systematic Savings Plan). But, if you already have one, pension plans are still a good vehicle to save and to benefit from the deduction; However, it must be taken into account that when it is rescued, it will be taxed as income from work.
What do you think about investing in cryptocurrencies?
It is a very juicy melon, but it is a very new and very risky investment. There are good projects with which you can make money, but you can also lose everything. The risk is very high and the only safe way to invest in cryptocurrencies is to invest little. The secret is to invest only amounts that you would spend on leisure and that nothing happens if you think about them. Investing in cryptocurrencies right now is still a roller coaster of emotions.
I don’t quite understand your phrase about wealth “not just being a quantity of money”…
Being rich is not just having a lot of money. That’s not enough, it’s just one side of the coin. Really, wealth is the ability to consume in the future and you have to put the other side of the coin: time. In finance, time and quantity always go together and time is often more important. Not only do you need to look rich and have a lot of money, but you also have to be able to maintain that rhythm of life always. Not only does it matter how much you have, but at what rate you spend it. We all know stories of millionaire heirs who go bankrupt and then there are people with modest incomes who organize themselves very well, who have a very adequate rhythm of expenses and who achieve financial independence, that is, they make their money last a lifetime and they can live off their savings forever.
Aside from timing, spending pace and strategies, is patience and not giving up if there are losses the key?
Totally. We have a very wrong idea of investing because we have seen many movies and series about Wall Street. The reality is that money is obtained slowly and with good handwriting. The investment is similar to watering a garden and some seeds with patience so that the plants grow. Money must be given time to grow, because compound interest and return work like an exponential curve and the more time passes, the faster it picks up. The few maintained for a long time give very good results and patience is the best adviser.
