My investment system

After the previous articles in this guide to investing from scratch, it is time to explain how I do it and why. The advantages —and disadvantages, because there are some— of my investment system.

Before we start, here are the articles I am referring to, in case you want to take a look before getting into this one:

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. (This is the one you are reading).
7. Wealth: how to increase it, protect it, and pass it on.

The importance of an investment system

I have tried to make it clear throughout the articles that the important thing is not choosing one specific product or another, but building a system.

One that adapts to you and your circumstances.

What are those circumstances?

Well, you can probably imagine them:

• Your wealth.
• Your age.
• Your aversion to, or appetite for, risk.
• Your monthly investment capacity.
• The time you want or are able to devote to the subject.
• Whether investing is going to be the core of how you generate income to live on, or a supplement.
• Whether you have a family or not.
• Whether you own a home or not.
• …

As you can see, there are quite a few variables to consider when building your portfolio.

Because any system, in general, combines different types of assets with different roles. You know, the four objectives assets could have that I explained here: one part seeks growth, another provides stability, another generates income, and another protects you in difficult moments.

And on the other hand, you have to decide how much control you want to have. If you prefer simplicity, ETFs or roboadvisors may be enough. If you want to optimize or understand more deeply what you are doing, you can combine stocks, funds, and other assets such as gold or cryptocurrencies.

The important thing is that the overall effect of all the pieces makes sense to you.

That is why I come across many people who are just looking for something simple to supplement their current salary for the future. And since they are clear about what they want and the level of difficulty, building their portfolio is fairly easy to do, as I will tell you in a moment.

By the way, everything I explain here is not investment advice, but the way I operate and how I would do it under certain conditions. 

My circumstances are mine and may not be yours, so take this as a reference and analyze whether it fits your situation or not. I will explain the reasons why I do one thing and not another, so you understand it and can see whether it applies to your case.

How I invest in any asset

Rule number one: invest only the capital you do not need.

In other words, the order of the investment process is as follows:

1. First analyze your usual monthly expenses. Calculate the average figure.
2. Be clear about your average income. With this and the previous point, you will already know your monthly investment capacity.
3. Build a safety cushion of between six months and two years of expenses, depending on how you respond to uncertainty. This money is never touched. Never for investing and, if you have to touch it because of an unforeseen event, replenish it before continuing to invest.
4. Define your investment system: assets, initial amount, and monthly contributions.
5. Run it on the right platforms and automate it. Do not let it depend on you, on whether you remember, or on how convenient a given month happens to be.
6. Optional: in the event of significant drops, analyze whether it makes sense for you to add an extra amount THAT DOES NOT COME OUT OF YOUR SAFETY CUSHION.

As you can see, I do not trade. I do not buy to sell quickly. I buy what I am comfortable with, and I prefer to invest less initially and make monthly investments rather than invest everything in one go.

Studies say that, in the long term, it is better to do it in one go. But I ate the entire 2022 bear market with some investment I had made just before. And I know how hard it is to watch your assets be worth less every day for a long period without a rebound.

Once you have toughened up in the world of investing, loss-aversion bias affects you less, but at first it can be a hard slap in the face, so my recommendation is this: the smallest possible initial investment and monthly contributions for at least one or two years ahead. And, ideally, with no limit.

It is what is known as Dollar-cost averaging (DCA) and it is simple and very practical for anyone.

This is ideal for funds and assets such as gold or Bitcoin. With stocks, in my case, it is a bit different, because what I usually do is make an initial investment that is not too large (always below €3,000) and then leave it to evolve.

In certain cases, when I see it fall and I believe that, despite that, it will rise in the future, I add capital so that my average purchase price goes down.

In any case, as I mentioned before, I am going to gradually unwind my positions in stocks and move them into index funds and Bitcoin.

My portfolio

Well, after explaining my system, let us move on to my current portfolio. I am going to explain, chronologically, how I have built my current portfolio over these years until reaching its current composition.

#1. Real estate

Like every average person in this country, I started with this thirty years ago. Basically, when I was living in Madrid, I bought an apartment in the center of Málaga for my mother.

But after a few years she was given a larger social housing unit and moved out, so I rented the apartment out. My goal was nothing more than to lose as little monthly liquidity as possible.

Rental property

As of today, the apartment is practically paid off and its valuation is almost 200% of what I paid for it at the time (right in the middle of the bubble).

Despite that my opinion is very negative: it has cost me more than it has given me, for several reasons:

The first is that living in Madrid made it difficult to manage properly.

The second is that, on top of that, I am in court with my tenant. Since 2023, when her contract ended, she has not left the apartment, and my trial is in April 2027.

Four years to be able to recover your own home seems mind-blowing to me. It is what it is in this country, increasingly a banana republic.

The third reason is that the return it has given me -in recent years, because before that not even that- is between 1 and 2%. In other words, pathetic. Less than any interest-bearing account.

And yes, when I recover it and sell it, after the relevant refurbishment work, I will make a bit more from it, but considering the cost of the work, capital gains payments, and taxes, there is no way it makes up for thirty years of worries.

That is why my opinion on real estate is that, if you do not have some competitive advantage -you have previous experience or you know builders and electricians who can refurbish it for you, or you have legal and rental-management contacts- then there are much better options for investing your capital.

Because it also limits you quite a lot for many other things, such as being able to move to another country if you feel like it, because, for example, owning a home will make the Spanish tax authorities try to keep your tax residence here.

And well, the legislation changes constantly, so you do not know when and how you will be able to use your home, nor how much you will be able to rent it for or to whom (elimination of tourist apartments). Legal certainty is minimal.

Not to mention that, whether you rent the apartment out or keep it empty, you will have certain expenses and taxes to pay.

In short, if you are looking for financial freedom, this seems to me one of the worst ways to start. And that is despite the fact that I know close cases of people who are doing well, but of course, they are people with three or four apartments who have already paid the price and already have their contact network properly established.

Primary residence

Investing in a primary residence changes the very negative concept a little for two reasons:

• You avoid the problem of tenants.
• You reduce part of its cost in the wealth tax return, if you have to file one.

That is why, if you are absolutely, completely sure where you want to live because:

• You work from home or you will never change to a job with worse transport links.
• The children are not going to change schools.
• There are no problems with the neighbors.
• You like the neighborhood and there are no projects that could change it (I am telling you because Málaga has changed completely in fifteen years).
• What you are looking for in a home now is the same thing you will want in ten or twenty years. Example: patio and pool on the outskirts vs a high, comfortable apartment in the center.
• The home is not going to become too small for you (it is large or you are not going to have more children).
• You are not considering the possibility of moving to another country.

Then investing in a primary residence does seem appropriate to me for the two reasons above. And for two more:

• The mortgage is a good way to save, especially after the first few years.
• And because feeling comfortable where you live is essential to being happy.

But be careful, reread the list of conditions above first, because if they are not met, there may be better investment options than a primary residence.

In fact, consider that it is quite common for people with quite a lot of money to live in rented good homes, because it pays off more for them to pay that rent than the mortgage on that home. And they are not stupid.

In my case, I inherited my primary residence and I am clear that I will sell it in a couple of years. What I am not at all clear about is whether I will reinvest that money in buying another one, despite the income-tax advantage of reinvesting in a primary residence after the sale.

#2. Funds

After paying down a good chunk of the mortgage several years later, I got informed and carried out several operations simultaneously. In other words, I contracted several vehicles.

This fund thing convinced me quite a lot beforehand, and I can tell you it still convinces me today.

Index funds

I am an extreme fan of what these index funds represent. 

And I would be even more so if it were not for the madness of money printing carried out by central banks, which certainly limits their real return.

And the thing is, although with these funds you can achieve high sustained annual returns -almost 10% annual average in my case-, if fiat money is devalued so much, the reality is that you are not 11% richer every year, but are in real terms around 5 or 6%.

Even so, it works for me. So much so that I use two (referral links if they have them):

• Indexa
• MyInvestor

Why two instead of just one, for greater peace of mind?

For two reasons:

• Because the Deposit Guarantee Fund, FOGAIN, only covers up to €100,000 per Spanish entity (both are).
• To diversify slightly too, since both portfolios are similar, but not the same.

If you want to start with one, I recommend Indexa. Basically because everything is simpler, it has more total capital invested, and the founders have their own capital in it, which gives me confidence. Besides, I think the website and the app are better.

By contrast, MyInvestor has an unbeatable range of assets, not only funds. It is more advanced than Indexa in that sense.

In both cases my portfolios are risk 10/10. Why? Well, because I am in it for the long term and I do not mind temporary drops, since in the end their return is higher. In any case, they make you take an initial test to adjust your portfolio risk to your reality.

Actively managed funds

At the same time as I was investing in index funds, I started with actively managed funds from my bank, BBVA (if you want to start with a gift, here is my code so you can add it when registering online: 10B20011121F4C).

In this case I invested in four funds that a friend who works precisely in this area at BBVA recommended to me (she is not my direct manager). The overall result was positive, but this year I moved everything to MyInvestor, since their fees are high and I trust the index-based system more. 

Even so, and despite the fees, the fund Megatendencias tecnológicas, which was the one in which I had invested the most capital, gave me a return close to 20% per year during the years I held it.

#3. Stocks

When I started with the funds, I also set aside some capital to see how this stock thing worked.

Since tech is what I understand, what I bought, in general, were companies of that type: Apple, Nvidia, Intel and AMD at first. Later I added others such as ARM, Palantir, Rivian and Nike.

The result has been extremely positive. But, to be honest, it has been more luck than anything else.

For example, with Nvidia I was losing money for more than two years, until thanks to AI it took off like nothing we had ever seen, which allowed me to sell my initial €2,200 investment for €11,000. And I still keep more than half of the total shares, bought much cheaper, for when it rises to around €270 per share, which is the current estimate analysts are making.

I say it is luck because with Nvidia, as with Palantir, it was hard to foresee this growth. That said, thanks to my system, which I detail in the next point, having my safety cushion meant I did not need -or want- to sell when Nvidia was down 60% on what I had put in. Intel fell even more. And Rivian is still in the hole.

I buy and sell stocks on XTB, mainly for convenience -the app works very well- although the fact that coverage only reaches €30,000 does put me off a little.

In any case, after trying it, I am quite clear that I am going to reduce my positions in individual stocks and move capital into index funds and Bitcoin, with which I align more ideologically.

And I will do it little by little over several years, since doing it all at once hurts you from a tax point of view (the percentage of tax you pay on gains goes up). 

Obviously, unless you are a business-information geek —balance sheets, estimates, sector swings— I do not recommend starting to invest in stocks. I think there are better options. 

And by the way, if despite my recommendation you decide to invest in this, look more at companies in the S&P 500 or the Nasdaq than in the IBEX35, please.

#4. Gold

The store of value par excellence. And there is a reason for that: because over the years it has proved to be a safe haven.

And it is not because gold gains value in itself, but because fiat money is devalued. I told you at the time that if you look at housing prices in ounces of gold instead of fiat money, you see that they have not risen. In other words, an apartment -which now seems terribly expensive- costs you the same ounces of gold now as thirty years ago.

That is the value of gold. Added to this is that, in times of uncertainty when other assets such as stocks or funds perform badly, gold shines.

That is why I consider it necessary to have a percentage of gold in your portfolio, between 5 and 10%. In my case I lean more toward 5%, but having 10%, or even a bit more, does not seem crazy to me at all.

I am exposed to price through an ETF on Degiro, because although I understand the value of owning physical gold, its custody is not convenient for me.

#5. Bitcoin

Once I was clear on how all the previous assets worked, that was when I entered the world of Bitcoin and decentralized finance.

After working on it quite a bit, I clearly see its advantages over fiat money, but also its drawbacks. And the thing is, the self-custody proposed by Bitcoin maximalists is not for everyone (although it should be).

That is why, if you do not want to self-custody your BTC, my recommendation is not that you buy it on a centralized exchange like Binance, but that you invest in an ETF, for example on XTB.

That said, today, Bitcoin is an asset that should not be missing from any portfolio, in whatever proportion each person considers relevant, knowing that it is a very volatile asset.

In my case, I have been increasing its weight year after year and, for now, I am not going to stop.

#6. Liquidity

I spoke earlier about the safety cushion you need to have and that you should not invest it anywhere. But liquidity can be held in your regular bank account, or in an interest-bearing account.

In my case, I use the one from Bankinter which pays me 2% a year, paid monthly. It is not a magic solution, but it is more than the 0% BBVA gave me. I still keep a small part at BBVA, because of the mortgage bonuses and because I like having options, just in case.

I also have part of it in an account at Wise in dollars, precisely for the same reason, in case anything happens:having a little money to get by in another currency gives me some peace of mind.

By the way, the Wise account also pays interest and generates small monthly payments for me, but because I have little capital there, they are insignificant.

And this is my entire investment portfolio, since I sold my share of my company some time ago.

Summary table

Asset / Vehicle	Function	Platform	Approximate weight	Opinion
Index funds	Growth	Indexa / MyInvestor	High	Main base
Bitcoin	Growth / Safe haven	XTB ETF / self-custody	High	Volatile, lots of potential
Gold	Safe haven	Degiro ETF	5-10%	Safe haven
Liquidity	Stability	Bankinter / Wise interest-bearing account	Cushion	Do not touch
Stocks	Growth	XTB	Decreasing	There are better options
Real estate	Income generation	Direct	Future exit	Bad experience

How to invest according to the initial capital available

A €3,000 portfolio is not the same as a €20,000 one, or a €100,000 one, or a €500,000 one. And although the base may be similar, each scenario requires certain adjustments.

This is what I would do in each case.

How to invest 100,000 euros

The first thing is that having this amount may surprise some people given the consumer society we live in, but it is not that difficult. Not through work, not through inheritance. Winning it in the lottery is rarer.

With that clarified, I will tell you that it will depend on your age -the younger you are, the more risk you can take because you have more time to correct the consequences if they are negative- but I am going to tell you how I would do it.

The first thing would be to have all the money in an interest-bearing account like the one from Bankinter, so that you generate returns while all the capital is being invested. In the end, we will leave nothing here.

50% of the total will go to an index portfolio at Indexa. Depending on your risk, the portfolio will be between 7 and 10. And the investment would not be all at once but:

• Initial investment: €3,000.
• Weekly investment: €500.

In approximately two years you will have invested everything we are going to allocate here.

40% to Bitcoin, with a DCA of €500 per week. Again, it will take you two years to have it all invested. If you want self-custody, better. If not, ETF on XTB.

10% to gold, with an ETF on XTB. Again, we would do DCA with €200 per week until covering the total.

And that is it. That would be all.

Does not sound very complicated, does it?

Because it is not.

If I wanted to complicate my life slightly, if I saw that some asset —especially gold and BTC— fell a lot for whatever reason (Iran war), since I am doing DCA and have remaining capital, I could make extra contributions, but it is not necessary.

Once everything is invested, the ideal thing would be that during this time I had been accumulating more savings to be able to continue with the plan indefinitely, but if not, with these contributions alone, without touching them and thanks to compound interest, I will already be generating a good and growing annual return, increasing my wealth far above inflation.

I know this is an investment with a high risk profile, due to the weight of Bitcoin, but it is what I would definitely do. The direction the traditional financial system has been taking for years invites me to step out of it, even if only partially.

How to invest 20,000 euros

In this case, I would remove gold from the equation and put 50% into index funds at Indexa and another 50% into BTC.

And the way to do it in both cases would be with a DCA of €200 per week, to have everything invested within a year.

How to invest 3,000 euros

Here things change, because the amount is small and diversification is not convenient: I would put it all into Bitcoin, since it is the asset with the greatest real return potential. And I would buy it self-custodied or through an ETF on XTB.

Depending on its behavior in the previous months and your monthly contribution capacity, I would consider whether to put it all in at once or do DCA of €500 per month.

How to invest 500,000 euros

And to finish, we get into a very different scenario. And of course, the picture changes. Quite a lot, in fact.

Because half a million is a more than reasonable amount to start thinking more about generating yield than increasing gains.

That is why, in this case, I would not be so aggressive. What I would probably recommend is something different:

I would start the same way, putting everything into an interest-bearing account that gives me around 2%.

From here, I would DCA along two lines:

On one hand, the bulk of the capital, between €400,000 and €450,000, would go into a fund such as the "S&P 500 Dividend Aristocrats", with an average annual yield close to 3% in dividends, which I would not reinvest.

My DCA here would be €1,000 per week, so it would take me almost eight years to be fully invested. Yes, I would generate less than if I invested it all at once, but I would also be less affected by the more than likely drops that would occur during this period.

The important thing is that throughout this time I would be generating passive income, both from the interest-bearing account and from the fund dividends. They would start at around €800 per month after taxes, but would progressively rise to €1,000, €1,200, €1,500.

And this without selling shares of the fund, whose value would keep increasing. In other words, you earn money in two ways: dividends and price exposure to your stake in the fund.

If you already have the mortgage paid off and the kids out of the house, it may be that with what this investment generates for you in a few years, you do not need anything else to live on, because, as I say, income will increase over time.

On the other hand, the other €50,000-€100,000 I would put into Bitcoin through a DCA of €1,000 per month. This is where I would seek the greatest growth in the portfolio.

Combining both investments and looking at history, it would not be at all strange to exceed one million euros in wealth in ten years.

Being a millionaire sounds good, does it not?

Summary of platforms I use

Here again are the platforms I use, with referral links if they have them (we both get a gift if you sign up through them):

Liquidity:

• BBVA (if you want to start with a gift, here is my code so you can add it when registering online: 10B20011121F4C).

Interest-bearing accounts:

• Bankinter
• Wise

Index funds:

• Indexa
• MyInvestor

Gold (ETF):

• Degiro

Stocks:

• XTB

Conclusions

My investment system is not about nailing the perfect investment, but about building a portfolio that adapts to my situation and that I can maintain for years.

For that I rely on three ideas:

1. Build your safety cushion before investing.
2. Select the assets that best fit your situation and diversify purchasing platforms only if it makes sense.
3. Do not invest all at once, but through automated recurring contributions.

In my case, each asset fulfills a function: index funds are the base, Bitcoin provides potential and volatility, gold protects, liquidity gives peace of mind, and individual stocks are increasingly taking a back seat.

Real estate, in my case, has been the worst investment because of the relationship between return, problems, and reduction of freedom.

In any case, what I have learned is that investing is not about getting excited when everything goes up, but exactly the opposite: about having a system you are convinced of, one that helps you hold on when things are not going so well.

With that and patience, you are well armed.

Next steps

If you want to move a little further forward, I invite you to continue with the next article in the series, which is already the last one:

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. (This is the one you are reading).
7. Wealth: how to increase it, protect it, and pass it on.