Public equities — shares of companies traded on stock exchanges — are among the most transparent and liquid investment options. Prices are updated in real time, companies are subject to strict disclosure rules, and investors can enter or exit positions daily.
These characteristics make open-ended investment funds (commonly called open funds or mutual funds) particularly suitable for this type of exposure, especially under UCITS structures that must accommodate regular redemptions.
However, when it comes to investing in Portugal’s stock market, the picture is more nuanced. As discussed in our previous article, the Portuguese market — represented by Euronext Lisbon and the PSI Index — is small, highly concentrated, and exposed to sector-specific risks. This makes it challenging for fund managers to build diversified portfolios, as most mutual funds inevitably hold similar positions.
To better understand what investors can realistically expect, we conducted a quantitative analysis comparing Portugal’s PSI with major global indices such as the IBEX35 (Spain), CAC40 (France), FTSE100 (United Kingdom), and S&P500 (United States).
Using 500 randomized five-year investment windows between 2015 and 2025, our analysis simulates the typical holding period of a Golden Visa investor.
The results provide a clear picture of what it means to invest in Portugal through public equity mutual funds:
- A median annual return of around 5.5%, meaning half of all five-year investment periods produced lower returns — a moderate performance compared to larger markets like France or the U.S.
- Investors should expect, at some point, a temporary decline (drawdown) of roughly 30–35%, which is normal but significant for medium-term holdings.
- After accounting for typical management fees of up to 2% per year, the net return falls closer to 3.5%, only slightly above inflation in recent years.
- The limited diversification of Portugal’s equity market makes fund selection and fee evaluation critical when considering Golden Visa–eligible investment funds.
In the following sections, we explore these results in detail — including how returns, volatility, and drawdowns in Portugal compare with other major markets, and what this means for investors seeking long-term residency through fund investment.
Methodology: 500 Random 5-Year Investment Windows (2015–2025)
To simulate the typical Golden Visa investment horizon — which requires maintaining an investment for at least five years — we analyzed 500 randomized 5-year periods between October 31, 2015 and October 31, 2025 for each index.
Each random window represents an investor entering the market at a different moment within this 10-year period and holding for five years.
For example:
- One simulation may represent buying the PSI in January 2016 and selling in January 2021;
- Another could represent June 2018 to June 2023, and so on.
Across these 500 random 5-year intervals, we calculated the following performance metrics for each major index:
- Annual return – the average yearly percentage gain or loss over the 5-year period.
- Annual volatility – the standard deviation of annual returns, representing uncertainty and risk.
- Maximum drawdown – the largest temporary loss from a peak to a trough during that period.
- Sharpe and Sortino ratios – measures of risk-adjusted performance, showing how much return was earned per unit of risk.
- Omega, Sterling, VaR, and CVaR ratios – additional downside and tail-risk measures capturing how severe losses can get.
This quantitative approach provides a distribution of potential outcomes, rather than a single historical return.
It’s a more realistic reflection of what a Golden Visa investor might experience depending on when they invested during the decade.
Comparing Markets: PSI vs. Europe and the U.S.
We benchmarked the PSI (Portugal) against four major developed-market indices:
- IBEX35 (Spain)
- CAC40 (France)
- FTSE100 (United Kingdom)
- S&P500 (United States)
The chart below shows cumulative index performance between October 2015 and October 2025.
While the S&P500 delivered more than +225%, European indices, including Portugal’s PSI, gained between +50% and +65% over the same period — highlighting the structural limitations of Portugal’s small stock market.
Performance Measures
The table below summarizes the main performance ratios from our 500 randomized 5-year windows (2015-10-31 → 2025-10-31).
| Index | Annual return | Annual volatility | Max drawdown | Sharpe ratio | Sortino ratio | Omega ratio | Sterling ratio | VaR (0.95) | CVaR (0.95) |
|---|---|---|---|---|---|---|---|---|---|
| PSI | 5.5% | 17.8% | 33.8% | 31.0% | 43.0% | 106.0% | 15.0% | 1.7% | 2.6% |
| IBEX35 | 2.5% | 20.6% | 39.4% | 13.0% | 17.0% | 102.0% | 6.0% | 1.8% | 3.1% |
| S&P500 | 14.3% | 21.2% | 33.9% | 68.0% | 95.0% | 114.0% | 42.0% | 1.9% | 3.2% |
| CAC40 | 8.5% | 20.5% | 38.6% | 42.0% | 57.0% | 108.0% | 22.0% | 1.8% | 3.2% |
| FTSE100 | 2.9% | 17.6% | 35.0% | 16.0% | 22.0% | 103.0% | 8.0% | 1.6% | 2.8% |
Notes: Ratios are computed from the 500 five-year samples. VaR and CVaR are 95% one-period tail measures (percentile and expected shortfall).
What These Numbers Mean in Practice:
For investors, the data can be interpreted in simple, realistic terms:
Expected returns:
An investor placing money in the Portuguese stock market (PSI) should expect an average annual return of around 5.5% over a five-year period.
This is the median result — meaning that, in half of the 500 simulated investment periods, returns were above this level, and in the other half, below.
In other words, 5.5% is a typical mid-range expectation, not a guaranteed outcome.Volatility and risk:
The PSI shows annual volatility of about 17.8%, which means that actual returns can fluctuate significantly around the average from year to year — sometimes higher, sometimes negative.
This level of volatility is comparable to other European markets.Drawdowns (temporary losses):
On average, investors in Portugal’s PSI should be prepared for a maximum temporary decline (drawdown) of around 33.8% during a typical five-year holding period.
In practical terms, if you invested €500,000, it could temporarily fall to around €330,000–€350,000 at some point before recovering.
This is a normal part of market behavior, even in developed markets like the U.S. or France.Comparing with other markets:
The S&P500 in the U.S. delivered higher median returns (around 14.3%) but similar drawdowns (about 33.9%).
The CAC40 in France achieved 8.5%, while Spain’s IBEX35 and the U.K.’s FTSE100 lagged behind with returns of 2–3% per year.
In other words, Portugal’s market sits in the middle of the European pack: moderate returns, average risk, and limited diversification.Key takeaway:
Investing in Portugal’s stock market offers reasonable long-term potential, but investors should expect substantial short-term swings and be comfortable with temporary losses of one-third of their capital during market downturns.
For Golden Visa investors, this reinforces the importance of diversifying across multiple asset classes — such as bonds, private equity, or private credit — to balance risk and improve overall portfolio stability.
Annual Return Distributions
To understand what a 5-year investment might realistically deliver, we analyzed the distribution of annualized returns across the 500 simulated 5-year investment periods.
| Index | Median | Below 0% | Below 5% | Above 10% | Above 15% |
|---|---|---|---|---|---|
| PSI | 5.5% | 0.0% | 40.0% | 17.2% | 1.0% |
| IBEX35 | 2.5% | 26.2% | 62.0% | 16.8% | 10.0% |
| S&P500 | 14.3% | 0.0% | 0.0% | 94.8% | 29.8% |
| CAC40 | 8.5% | 0.0% | 4.4% | 23.4% | 0.8% |
| FTSE100 | 2.9% | 1.2% | 83.2% | 2.8% | 0.0% |
What These Numbers Mean in Practice:
Typical outcome:
A median return of 5.5% for Portugal’s PSI means that, in half of the simulated 5-year periods, investors earned more than 5.5% per year, and in the other half, less. It’s a realistic average of what an investor might expect from the Portuguese stock market over a medium-term horizon.Probability of low returns:
There’s about a 40% chance that an investor in the PSI will earn less than 5% annually, even with a 5-year holding period. This doesn’t mean losing money, but rather achieving modest growth that might barely outpace inflation, especially after considering fund management costs.Probability of strong gains:
Only 17% of PSI 5-year periods delivered more than 10% annual returns, and just 1% exceeded 15%. These figures show that very high returns are uncommon in Portugal’s relatively small, slow-growing market.Comparison with other markets:
- The S&P500 (U.S.) had a median of 14.3%, and nearly all periods (95%) delivered over 10% per year — highlighting its exceptional growth and consistency.
- The CAC40 (France) was more moderate at 8.5%, with one in four periods above 10%.
- Spain’s IBEX35 and the U.K.’s FTSE100 performed weaker, with low median returns (2–3%) and frequent underperformance (more than half of periods below 5%).
Takeaway for Golden Visa investors:
The Portuguese equity market offers moderate but variable returns — not as strong as the U.S. or France, but steadier than Spain.
A realistic expectation for a 5-year PSI investment is annual returns around 5%, with a 1-in-5 chance of reaching double digits.
This reinforces the need to compare historical performance, risk, and fees before selecting a Golden Visa mutual fund.
Risk Perspective: Maximum Drawdowns
While returns drive performance, drawdowns reflect the stress investors endure along the way.
A maximum drawdown measures how far a portfolio can fall from its peak before recovering.
| Index | Median | Above 20% | Above 30% | Above 35% | Above 40% |
|---|---|---|---|---|---|
| PSI | 33.8% | 82.6% | 82.0% | 41.8% | 0.0% |
| IBEX35 | 39.4% | 100.0% | 83.2% | 82.2% | 41.2% |
| S&P500 | 33.9% | 100.0% | 81.0% | 0.0% | 0.0% |
| CAC40 | 38.6% | 100.0% | 81.6% | 81.4% | 0.0% |
| FTSE100 | 35.0% | 84.2% | 83.4% | 68.8% | 0.0% |
What This Means for Investors:
Drawdowns are normal — and unavoidable:
Every stock market experiences temporary declines. The key difference is how deep and how long they last. For Portugal’s PSI, the median maximum drawdown was 33.8%, meaning that during a typical 5-year period, the index fell roughly one-third from its peak before recovering.Practical impact:
For an investor with €500,000 in a Portuguese equity fund, this would correspond to a temporary drop to around €330,000–€350,000 at some point in the investment cycle. This doesn’t mean a permanent loss — but it shows the level of short-term volatility an investor must tolerate.How common are large declines?
There’s roughly an 80% probability that an investor in the PSI will experience a drawdown greater than 30%, and about a 40% probability of a decline greater than 35%. These figures are comparable to major global markets, which also suffered large, temporary corrections in recent years (such as 2020 or 2022).Comparing across markets:
- The S&P500 (U.S.) showed similar median drawdowns (~34%) but a much better recovery profile, thanks to its stronger growth momentum.
- France’s CAC40 and Spain’s IBEX35 were slightly worse, with more frequent drawdowns above 35% or 40%.
- The FTSE100 (U.K.) displayed slightly lower volatility but still saw significant pullbacks.
What this tells Golden Visa investors:
Investors in Portugal’s stock market should expect that short-term declines of 30–35% are likely at some point during a 5-year holding period.
This level of volatility is normal for equities, but it reinforces the importance of:- Having a long-term mindset rather than reacting to short-term drops.
- Ensuring diversification across other asset classes like bonds, private equity, and private credit.
- Understanding risk tolerance — being comfortable with temporary declines before committing capital.
Final note:
These drawdown figures reflect market movements before fees. For mutual funds charging around 2% per year, fees can widen the effective drawdown and delay recovery time, especially if the fund doesn’t outperform its benchmark.
Performance Ratios: Risk-Adjusted Returns
The boxplots below summarize a range of performance metrics across indices — from return to volatility and risk-adjusted ratios such as Sharpe and Sortino.
While the PSI’s absolute returns are lower than global benchmarks, its risk-adjusted metrics are broadly comparable to its European peers.
This reflects relatively contained volatility, though the index remains heavily concentrated in a few sectors, making it vulnerable to single-company or regulatory shocks.
Important Considerations for Golden Visa Investors
The following considerations are essential for investors evaluating open-ended mutual funds and Golden Visa–eligible investment structures operating in Portugal’s stock market.
1. Analysis Period and Limitations
This analysis covers the past decade (2015–2025) — a period without major systemic crises such as the dotcom bubble (2000) or the subprime crash (2008).
A broader backtest including those episodes will be conducted to evaluate how Portugal’s stock market performs under extreme downturns.
2. Diversification is Essential
Investors should seek exposure across equities, bonds, private equity, and private credit to mitigate volatility and concentration risk.
(Note: direct real estate investments are no longer eligible for the Golden Visa program.)
3. The PSI Market is Small and Highly Concentrated
With only a few liquid listed companies, it is nearly impossible to diversify beyond the PSI index.
Most Portuguese mutual funds therefore hold similar core components.
Discretionary managers may adjust weightings, but the investable universe remains narrow — making timing and allocation the key sources of performance differentiation.
4. Limited Track Record Among Eligible Funds
Many mutual funds eligible for the Golden Visa have less than four years of track record, making it difficult to evaluate their behavior in different market cycles.
Investors should always request detailed performance data — even if unaudited — to understand risk and drawdown patterns.
5. Ask the Right Questions Before Investing Investors should conduct a thorough review of each fund’s investment process and risk management approach, including:
- How are assets selected for the portfolio?
- How is the allocation between equities, bonds, or other instruments determined?
- For fixed income exposure, what are the criteria in terms of duration, credit rating, or yield curve positioning?
- How does the fund optimize its asset allocation — based on index weights, equal weights, or quantitative risk-based methods such as risk parity or mean-variance optimization?
- Does the manager employ any systematic or data-driven approach to improve risk-adjusted returns?
6. Evaluate Experience Beyond Golden Visa Products Since many funds are new, investors should assess whether the fund manager or management company has experience managing other mutual funds and compare those results with peers and relevant benchmarks.
7. Understand the Fee Structure and Its Impact
Many Golden Visa–eligible mutual funds charge management fees around 2% per year, sometimes coupled with performance fees or subscription fees.
While such fees are common in private equity or private credit, they are relatively high for public equity or mixed mutual funds.
For context:
- Average actively managed equity fund fees: ~1.2% in Europe, 0.7–0.8% in the U.S.
- Passive ETFs: typically below 0.3% per year.
Our quantitative analysis shows that the median annualized return for the PSI index over a 5-year holding period was 5.5%.
After deducting a 2% annual management fee, the net return falls to roughly 3.5% — only slightly above recent inflation levels.
If a performance fee (typically 10–20% of profits) applies, net returns may be even lower.
It’s therefore essential to understand why these fees are charged, whether they reflect:
- Genuine active management and alpha generation,
- Access to specialized or less liquid investments, or
- Additional regulatory and compliance costs linked to Golden Visa eligibility.
Investors should always ask fund managers to clarify the purpose, structure, and rationale of their fees — and how they align with long-term investor outcomes.
Final Note: Data and Fund Insights
we provide one of the most comprehensive databases of Portugal Golden Visa–eligible mutual funds.
Our platform includes detailed information on:
- Historical fund performance and volatility;
- Manager track records and experience;
- Quantitative insights into returns, risk, and drawdowns;
- Updated fee structures and fund eligibility status.
We aim to help investors make informed decisions through data-driven analysis of Portugal’s stock market and mutual fund ecosystem, combining transparency with professional due diligence.