Why a Star Fund Manager Held 410 Losers on Purpose 

Hello everyone, Rahul Shah here, trying to make investing accessible and profitable for the average investor.

You've heard of eagle investors. The ones always hunting for the next big multibagger, the next hot sector, the next 10x stock.

But here's a truth that shocked me: most truly successful investors aren't eagles. They're squirrels.

Yes, squirrels.

Cautious, risk-averse, survival-minded. And today, I'm going to prove it using Prashant Jain's own numbers, Warren Buffett's track record, and a 10-year study I ran on 220 stocks across 11 PE buckets.

Let's go.

Prashant Jain - legendary former CIO of HDFC Mutual Fund - managed Indian markets for nearly two decades.

In his final letter, he revealed something extraordinary. Over his tenure, he held 465 different stocks across his portfolios.

But just 55 of them - barely 12% - contributed 85% of all his gains.

Think about that. The other 410 stocks? Laggards, break-evens, or outright losers.

Now, move to Omaha. Warren Buffett and Charlie Munger have said the same thing. If you removed just 10-15 of Berkshire's best bets across 60+ years, their record becomes... average.

Charlie Munger put it bluntly:

'It is remarkable how much long-term advantage we have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.'

So if even Jain and Buffett didn't know which stocks would win... what were they actually doing?"

"Most people think great investors are eagles. Eagles soar high, scan wide hunting grounds, chase new challenges, and live for growth.

But Jain and Buffett? I call them squirrel investors.

Squirrels are cautious. They prioritize safety. They avoid predators. They survive first, thrive second.

Here's the key: Squirrel investors don't try to predict winners. Instead, they focus on avoiding the zeros.

Why? Because a long stream of numbers multiplied by zero... ends in zero. One fraud, one bankruptcy, one permanent loss erases decades of compounding.

So their mantra is simple: tilt the risk-reward in your favor, stay alive, and let the 55 winners find you."

"I wanted to test this squirrel hypothesis myself. So I ran a study.

My goal: minimize downside. No qualitative analysis. No industry research. No trying to pick winners.

I created 11 portfolios of 20 stocks each, rebalanced every 12 months, from December 2014 to December 2024.

The only filters:

• Minimum revenues ₹ 2 billion
• Positive earnings each of last 5 years
• Daily liquidity ≥ ₹ 1 million
• Debt-to-equity between 0 and 1

Then I divided stocks into 11 buckets based purely on PE ratio.

Now look at the screen. Every number you see is what ₹ 100 invested in that bucket grew to over 10 years.

• P3 (PE 10-15): ₹ 1,099
• P2 (PE 5-10): ₹ 1,041
• P1 (PBV based): ₹ 864 and so on

For comparison:

• BSE SmallCap index: ₹ 496
• BSE 500: ₹ 329
• Sensex: ₹ 285

The result? Every single low-to-moderate PE bucket (P2, P3, P4, and even P1) crushed the benchmarks. P3 turned ₹ 100 into over ₹ 1,000 - nearly 4x the Sensex return.

But the high PE buckets - 40x and 45-50x -underperformed the BSE Small Cap index and were very close to the Sensex and BSE500 returns.

What does this tell us? You don't need to be an eagle. You don't need to pick winners. You just need a simple, repeatable framework that avoids overvalued traps and keeps your downside protected. The winners will emerge on their own."

So, here's the conclusion.

"Prashant Jain's 55 winning stocks out of 465. Buffett's 15 decisions out of a lifetime. My PE study showing low-multiple portfolios turning ₹ 100 into over ₹ 1,000 in 10 years.

The common thread?

These investors didn't know which stocks would win. But they built systems where the winners, when they came, were large enough to carry the rest. And the losers were small enough not to blow everything up.

So here's my question for you:

Are you investing like an eagle - chasing highs, hunting new ground, hoping for a 10x?

Or like a squirrel - careful, disciplined, focused on survival, knowing that the winners will take care of themselves?

The data says the squirrels do end up with very good long-term returns after all.

If you found this useful, like, subscribe, and comment below: Are you a squirrel or an eagle?

This brings me to the end of today's video. I will see you again in the next session. Good bye and happy investing.