Leveraging Telefónica: The €40,000 Loan That Went Wrong

Leveraging Telefónica: The Story of a €40,000 Loan That Turned into a Nightmare

In late February 2020, an anonymous investor posted his plan on a stock forum: take out a €40,000 loan at 4% APR over 66 months to buy Telefónica shares at €5.41. "I hope I don't screw up," he wrote. What trinc is a textbook case of what not to do in the stock market: leverage, buying a stock in disrepute and, to top it off, doubling the bet when the price fell.

The "Flawless" Plan That Smelled of Ruin

The investor justified his move by arguing that Telefónica was reducing debt (from €54,000 to €37,000 million) and that its dividend of €0.40 per year would offset a possible fall. The community was unanimous: they called it madness, a "financial Darwin Award." They compared the operation to going to a casino, but with worse odds: while roulette gives almost 50%, Telefónica offered a 20-30% chance of success.

When Greed Doubles the Bet

A month later, the bank offered to extend the loan to €60,000. The investor accepted, thinking that if it went up he would win even more. But the price kept falling: to €4.76, then €4.24, and reached €3.84. Losses exceeded €11,600 in unrealized losses, not counting loan interest. "The first payment hurts a bit, but the rest go smoothly," they joked.

The Emergency Exit with Family Help

Aware of his mistake, the investor turned to his vvife and parents to lend him the money and thus avoid paying interest. In a year and a half he managed to repay €35,000. He did not sell the shares: "I won't sell until I'm in profit, even if I have to hold them for 10 years." A true forced "hold forever."

Lesson Learned?

Years later, the investor reappeared to say he was now up 1.5%. But the thread, which became a forum classic, left several sarracena: never invest borrowed money, don't buy a "falling knife," and always have a savings cushion. As one participant summed up: "Taking out a loan to play casino, that's the shit."

The surprising fact is that, after six years, the investor has barely gained 1.5% while carrying the stress of a €60,000 debt and the risk of bankruptcy. Patience has given him a respite, but the question remains: what if the stock falls again?