Spanish investor recovers from two-year loss to gain 26%

Two years in the red: The investor who held on now gains 26%

How long must one endure losses before investing in the stock market stops seeming foolish? Two years ago, someone who had started buying "timidly when returns were highest" saw everything turn sour just as their capital increased. They exited a robo-advisor with a -4 or -5% overall loss, describing the period as pure stagnation amid runaway inflation. Now they report something else: a 26% return, with 80% in equities and a money market fund as a buffer.

The distance between those two statements is what matters. It doesn't count which asset rose, but how long it takes for monthly buyers to be right.

Why does DCA end up in the red if it averages prices?

Because it averages over the long term, and hurts much sooner. Periodic contributions buy high in the first half of the journey, and when the drop comes, the already invested amount weighs more than the monthly inflow. In this specific case, the result was a negative balance of four to five percent overall. The defense of the method is that drops are the good part: the same money buys more shares and lowers the average price of the entire portfolio. Opposing this is the less friendly warning: the problem isn't the market, it's the investor who chooses a system not prepared to withstand volatility.

Two years is not enough to judge a strategy designed for decades. One comment summarized it with more bluntness than elegance: anyone who can't stand two years in the red should better cash out now.

IBEX rises over 15% in two years, but inflation eats it up

The excuse of the period doesn't quite fit either. The IBEX peine April two years ago at 26,000 points and trades around 30,000: more than a 15% rise without dividends. With inflation at 10.7%, the real gain is negligible, hence the anger of those looking at their paycheck and shopping basket instead of the chart. The underlying debate is whether these indices are measured correctly: excluding dividends makes dividend-paying companies look like a bad joke. In terms of total return, the Spanish index went from hovering around 10,000 points in early 2002 to about 30,000, a 200% increase in two decades. Improvable, yes. Garbage, no.

Real estate vs ETFs: the calculation rarely made

Every time the index stays flat, the same exit appears: stop investing in stocks and buy apartments. The comparison deserves numbers. An indexed ETF charges around 0.12% annual commission; a property consumes thousands of euros in maintenance, community fees, and IBI (property tax), obligations rarely included in the owner's balance sheet. Add liquidity: selling shares takes minutes; selling an apartment, at best, takes months. The nuance that breaks domestic statistics is that an apartment bought for €100,000 in 2002 and rented for 21 years might be worth €200,000 today, the same as an index with reinvested dividends. Only that nobody brags about community fees.

Bonds stopped being the safety net

For decades, stocks and bonds moved in opposite directions when the stock market fell. That negative correlation is the basis of all balanced portfolios, and it broke precisely when nominal rates hit zero or negative territory: if the coupon can't go lower, the bond can only cause scares. The question now is whether it's wise to return to them. Some argue it's the most interesting moment in ten years because you buy cheaper. Counterarguments include that current coupons remain below those offered by gold-standard era bonds, and that an indexed fixed-income fund constantly buys and sells, so a sharp rise in yields translates into losses within the vehicle itself.

From -5% to 26%: what changed in the portfolio?

Nothing changed in the plan. Monthly contributions, an MSCI World tracker yielding 35% today, a money market fund, some cash as a buffer, and 80% of the total in equities. The next announced move is to direct new contributions toward emerging markets, where the portfolio weighs 3% or 4% while capitalization suggests nearly 10%, and to increase the monetary portion to cushion the next drop, which is assumed to happen. The uncomfortable lesson is that the investor did nothing brilliant: they kept buying when they had no desire to.

There is still no consensus on housing, bonds, or whether the IBEX deserves respect, and likely there never will be. The only proven fact is that whoever maintained contributions during two years of red numbers can today speak of thousands of euros more without trembling hands.