Letter to Portfolio K Investors: First Half 2026 Results

This is not a report. It’s a letter. We’re here to make money, yes—but also to enjoy the journey.

The Same Stone, Four Years Later

When I stepped away from institutional portfolio management, I promised myself I’d never again write one of those investor letters that not even my own mother would read. And yet, here I am again, four years later. They say humans are the only creatures that stumble over the same stone twice. Apparently, I like to do it three or four times.

But this time I want it to be different. I don’t want to write the kind of investor letter that not even your mother would read. We’re here to make money, yes—but also to enjoy ourselves.

I have the bad habit of laughing at almost everything. I struggle to stay serious, even at a funeral—that’s just the way I’m wired. I think I inherited it from my uncle Ramón, who once wandered around a cemetery with his brother choosing where they’d eventually be buried:

— I like the corner one. It gets plenty of sunlight.

— I don’t know… too many people walk past here. I’d rather have somewhere quieter.

— You’re right. After all, this is where you come to rest in peace.

And I’m sure he is…

I can also read minds. Right now you’re probably thinking: “What on earth has this guy been drinking? He’s talking about cemetery plots and all I want is for him to tell me what Telefónica is going to do tomorrow.”

The Best Investor Rests in Peace

Well, here’s the thing: the best investor has far more in common with someone resting in eternal peace than with someone who spends the whole day reading the news. There was a time when I did exactly that—I won’t lie to you. Every first Friday of the month, there I was, at 2:30 p.m. Central European Time, waiting for the U.S. Nonfarm Payrolls report.

— Seriously?

— Seriously.

Can anyone be more boring? Yes, absolutely—but it takes real effort.

I haven’t looked at those numbers in years. I simply don’t care anymore, because the market doesn’t care either. Maybe it matters for the first hour, but ten years from now nobody will remember the jobs report released in July 2026. You’d be much better off sitting at a beach bar enjoying some patatas bravas.

Anyway, back to the point before I drift off again: the K Portfolios. How did they perform during the first half of 2026?

I was about to tell you I care about it as much as I care about July’s employment report, but I suppose you’re not yet at my level of investment enlightenment. You still need reassurance. You still need someone to tell you that everything is fine.

How much did your house appreciate this semester? Oh… you have absolutely no idea? Exactly. That’s precisely how you should treat your financial investments. But I have a feeling you’re not going to listen to me, so let’s get to it.

“The best investor has more in common with someone resting in peace than with someone reading the news.”

A Team, Not a Superstar

Let’s use a K8 Portfolio to review the first half of the year. Remember: K Portfolios are built to last because they invest in what never changes, through index investing, at low cost, and with proper diversification.

What does that actually mean?

A well-diversified portfolio is made up of assets that behave differently from one another. That’s the Holy Grail of investing: it’s not about knowing which asset will perform best over the next ten years—nobody knows that, not even your know-it-all brother-in-law. It’s about building a team where every player shines at a different moment.

And that’s exactly what happened during this turbulent start to the year. Let me walk you through it, asset by asset, because it’s a small movie in itself.

Gold

Gold had its moment in the spotlight and reached all-time highs… only to fall, and keep falling, once again leaving those who bought at the top wondering what they were thinking. By the end of the semester, it had become the weakest asset in the portfolio. And you know what? Perfect. That’s exactly why it’s there: sometimes it pulls the cart, and sometimes it steps aside while another asset takes over.

Energy and Technology

Then suddenly, war broke out and—boom—the Strait of Hormuz was closed. While technology stocks were falling, energy was soaring. Beautiful. I love negative correlation. But then technology suddenly stopped falling and started flying again, while gold remained weak and energy collapsed.

Defensive Sectors

Some days healthcare, utilities and consumer staples led the market; other days technology took over. Each one moving at its own pace. And what does all of this add up to?

What Does All This Add Up To?

This.

And I’m not going to bore you with Greek ratios or annualized returns—which, over a six-month period, are little more than a carnival trick. Taking half a year and multiplying it as if the other half of the year were guaranteed to unfold exactly the same way is anything but serious.

Instead, I’ll give you exactly what happened during the semester.

+9,1 % Return for the Semester 10.000 → 10.911 €

10,9 % Annualized Volatility Typical “Aggressive” Portfolio: 15–22%

−4,0 % Maximum Drawdown Recovered in 2 Months

€911 in gross profit on a €10,000 investment. But that’s not the number I care about. The one that matters is the one next to it: a portfolio that experienced only 10.9% volatility, with a worst drawdown of just −4.0%… while holding assets that individually suffered declines of 15%, 20%, or even more.

The Worst Drawdown, in Perspective

A maximum drawdown of −4.0%, fully recovered within just two months (bottoming in March and reaching new highs again in May). Put differently: if you had invested €100,000 at the absolute worst possible moment, the lowest value you would have seen in your account was €96,046 before the portfolio recovered. In a semester that included a war, that’s not luck. That’s portfolio construction.

Everyone Dancing to Their Own Rhythm

I know I promised not to bore you with ratios. But I’m a quantitative portfolio manager, so you’ll have to forgive me: correlation is part of who I am, just as the ball is part of a footballer. And this is the picture that sums up the entire semester. Don’t look at it with fear—look at it as a dance floor: green = two assets moving independently or in opposite directions (good for you); red = two assets moving together (redundant).

Correlation matrix by asset class. K8 Portfolio – H1 2026.

Look at the green boxes—they’re the ones that make you money while you sleep:

• Energy vs. Technology: −0.82. When one takes off, the other falls. That’s how extreme it is. Two equity sectors, both volatile—energy even more so than technology—moving almost as mirror images of each other.

• Energy vs. Bonds, and Energy vs. Healthcare: −0.57. The inflation sector providing protection precisely when defensive assets are struggling.

• Technology vs. Real Estate: −0.44. Another counterbalance within the same team.

And do you know what all this dancing translates into? Here’s the figure that sums up this entire letter:

The portfolio recorded 10.9% volatility. The weighted average volatility of its individual assets, taken separately, would have been 21.3%. In other words, combining assets that don’t dance to the same rhythm eliminated 49% of the risk—without giving up expected returns. That’s real diversification. It’s not about owning lots of funds; it’s about owning funds that don’t all move the same way.

What I Want You to Take Away

Not the +9.1% from a single semester—that’s just noise. Nor who came out ahead over the past six months. Take this with you instead: your portfolio withstood a war, the closure of the Strait of Hormuz, and gold doing handstands, and its worst drawdown was −4%, fully recovered in two months. Because whenever one asset stumbled, another stepped up.

Confidence. Mindset. An evergreen portfolio. We invest in scarce assets, through index investing, at low cost, and carefully combined. Money is abundant—it can be printed. Scarcity, by definition, becomes more valuable over time. And you don’t need to guess tomorrow’s headline—you need a team where every piece dances to its own rhythm. That’s what you have.

So here’s my advice: stop checking your portfolio every day, forget about July’s employment report, and go enjoy those patatas bravas by the beach. If you’ve made it this far and you’ve laughed at least once—or you’ve understood why your portfolio holds energy and gold—then this letter has done its job. And honestly, that’s no small achievement.

Best regards,

Pablo González Vidal

The K Project · K8 Portfolio

Gross returns (before taxes), based on the historical performance of the K8 Portfolio during the January–June 2026 period. Past performance does not guarantee future results. This document is for educational purposes only. The K Project is not a financial advisory firm regulated by the CNMV.

APPENDIX

Beyond the Semester

If you’ve made it this far and want to look beyond these six months, here’s the cold, hard evidence. I’ve taken the last 14 semesters of the K8 Portfolio and placed them alongside the global market (MSCI ACWI, via the SPYY ETF). The entire message of this letter, in a single chart: returns are reshuffled every six months—that’s luck—but the risk profile remains consistent semester after semester.

14 / 14 K8 was less volatile than the market in all 14 semesters Without a single exception

beta 0,63 K8 moves 0.63% for every 1% move in the market Downside Cushioning

54% / 74% Downside / Upside Capture Favourable Asymmetry

What the Numbers Say

K8 was less volatile than the market in all 14 semesters, without a single exception, with average volatility equal to 70% of the ACWI’s (9.2% versus 13.0%). Its beta is 0.63: when the market moves 1%, the portfolio moves only 0.63%. And where it matters most—during market downturns—it captures just 54% of the downside compared with 74% of the upside. This asymmetry explains why its worst drawdown was −11.7%, compared with −19.2% for the index: in 2022, K8 finished up +1.7% while the market lost −5.4%; during the COVID crisis, it fell only half as much. The cushion comes from the 20% allocation to gold and the bond exposure—not from luck.

And what about returns? It depends on where you start measuring them, which is why short-term performance is a poor benchmark. Over this specific period, the market outperformed K8 by just two-tenths of a percentage point, but over rolling 3- and 5-year periods K8 comes out ahead, with 92% of rolling twelve-month periods delivering positive returns. The portfolio reaches a similar—or even better—destination while exposing investors to one-third fewer bumps along the way. That’s the part that consistently repeats itself.

One final perspective: the efficiency of each semester—return divided by volatility. By that measure, K8 outperformed in 9 of the last 14 semesters, including all three periods of real market stress (COVID, 2022 and the spring of 2025). The market only comes out ahead during periods of strong bull market euphoria, when pure equities naturally run faster. But efficiency, like risk, remains remarkably consistent; raw returns come and go.

Semester-by-Semester Breakdown

R/R = Semester Return ÷ Volatility (Efficiency). The winner is the portfolio with the higher R/R. Source: The K Project backtesting engine (EODHD daily closing data). K8 Portfolio (Risk Profile 8/10) = 70% MSCI World sector equity allocation + 10% EUR 10–15Y government bonds + 20% gold. Annualised volatility is calculated from daily returns; the K8/ACWI volatility ratio (≈0.70×) matches the tool’s monthly volatility. Past performance does not guarantee future results.