He Built A Live Quant Stock Portfolio That Shocked Me Ft Rishabh Nahar Kushal Lodha 349

TITLE: He Built A Live Quant Stock Portfolio That Shocked Me | Ft. Rishabh Nahar | Kushal Lodha #349 CHANNEL: Kushal Lodha DATE: 2026-06-27 ---TRANSCRIPT--- So how much money do you manage in total right now? And what returns did you generate over the Last Whatever Years? We are managing about 6700 crore like a Track Record That I Have Achieved Since 232% for 2018 and Could Be Anywhere Between Most of the investors. Today’s our Guest is Rishabh Nahar Fund of Code Advisors Manager. Today we have discussed Quant in full detail. Investing frameworks learned from them and In fact, we also have a live quant strategy. It has been created which you can learn and select stocks Can. Something if we were talking about gold So let’s compare that to USD What were the returns in terms and IAR? Is it absolutely right? From 2016 to now You got a return of 452% in IAR terms 239 in USD terms. so much There is a difference. Yes. Highest Performing Stock Market in the World. You will be surprised This is the Karachi Stock Exchange. what’s the Highest Amount of Money You Have Made On stock. After Before Vari Energies Vas Listed there was very renewable deck. I Think 250 Bugs and 300 Bucks of the Entry Place and and and and and and and and And then we excited about 23, 2400. That was like very short span like from 7-t months. It was only 3% off hours Portfolio and it became not 30% off our Portfolio. So that stock and up doing Extremely well. another business that did Extremely Well Was Tata Like, How Much X Did you make in that. That We Entered About ₹7,800 and we exit about ₹9,000. So what will be super interesting is that If you can show us a live model of that How do you create and then through that model? How do you generate returns? So we also Understand how to do quant investing What happens and how does a quant investor Make their models so what have we done right We made Wow Thank you, thank you so much for doing this. I think I watched a lot of your podcasts. Whenever we talk about Hand and Quant Investing We do. I think Rishabh Nar is the name that Comes to the mind. So for People Who Don’t Know About you. How do you introduce yourself Would you like to? what do you tell about yourself Would you like to? So basically you know I am a quant Investor cushion. And when I say quant Here at Investor What I Mean Is We put emotions aside in investing. Want to keep it. And That Is the Entire Idea. If you have rules, then rules. You can do it with a pick. If you need to write code If it comes then you can do it through code. But the The entire idea is I caught a sophisticated I became famous. Algorithmic Trading It became a sophisticated name. But a Simpler version of what we do in code is Basically rules based investing. So I came would you know since my journey started It happened around 2013-14, since then I The mindset was always that to make investing A Systematic Process and Whatever Subjectivity is what you know about investing. removing you know that is the always object like That was the thought, the idea was that as many Also you know insights or calls to take that Must be data driven. And that was the Thought process. So in sh you know today I am Sort of labeled as a quant investor but More of a systematic investor than I would. So we are managing about 6700 crores in Terms. Wow AUM Today and We Managed Across Meaning there are different strategies. across which We are managing it. I am doing this since About Eight Nine Years Now. Prior to that I was working with in the industry. But code as you know by myself when I Started with my other partners as a Very Small Organization It’s Around 2016 And when we started and you know today 2026 so when we started of Kushal Hum There were only three of us and we also bought a flat. It was a small two-bedroom house in Dadar. In that I used to sit in a room which My first partner was he is also he at A partner of mine used to sit in a room And then Karan Joy as he is the third partner And he used to sit in the hall and we ourselves Hey you know because the background of the three of us B.Com CA You know we all from the commerce Background: We did not know coding, so we Earlier, but we knew finance at all. points of time so we understood that Our journey to how markets move Trading Started Just Like Every Other Investors are heavily into FNO trading. They used to take leverage and then you know us this I realized that I spend the whole day in front of a screen. I can’t sit. So we said you know We systematize this. and that’s Where the Journey of Quant Investing Started. Where we learned coding and You know that was that was the starting Point. Prior to that I was working at Another PMS where I had two or three years of age Analyst work. Subjectively Stocks used to pick up. I meet with management Was. Used to go to the factory. I was looking at the product. Used to talk to the distributor. So I did All of those things. valuation models Made a lot of them. May be over a 100 you No. 80-90 different companies analyzed from different sectors and you know so that was prior to starting off by myself And then when I started off by myself You know the capital was small so I felt that you know I will have to take some leverage, so I I moved from investing to trading. You know after trading a little bit more than we Came Back to Investing Realize That OK Fine you know investing also a lot of money And the idea was always there. Seeing all the other investors in Was Hunger that you know they have achieved something and we Also want to get there. So that was the Journey and This Is Where We Are Today. So 9 What would your CAGR be in 10 years? On your portfolio? So See On My Own Portfolio The Numbers Are A lot higher because initially no leverage too I had taken it. Ah, but if I would have to say Like a track record that I have achieved From Since 2018 Would Be Anywhere Between to 23 24% and most of the investors as a CAGR numbers. Last Few Years You Know at Code We Have Done Exceptionally well. The code we released in November 2024 I launched our flagship strategy Was. And it happened to be the peak of the market. So we probably chose the worst Time to start a you know our flagship Strategy End 2024 November to Present We have annualized about 31% and in the same Time Period Nifty Is Down About One And 2% So You Know That Has Been a Good Alpha Generation Period for Us and Our Thesis The focus has always been on risk. Management You Know Focuses on the Down Side Upside down, you know we will take care of it. Itself So We Don’t Want to Be a Hero in The Bull Market. You want to be a hero in a Bad market. Because in a bull market Anybody can make money. It’s not that hard. You just have to stay exposed. that your If you have a portfolio and are exposed You will make money. Just like we did in 2020 24 I’ve Seen You Know As Long As You Were Invested you have done well. so you know then We felt that attention should be paid to fine reparations. should give. Pay attention to protection Needed And the last two years has been really Good for us. And That’s Why You Know We End up racing some good AUM and people have Trusted Asar Money. So today we have about Anywhere between 180 to 200 investors. I have a strong relationship with each of them Investors that have invested with us. You No to whatever extent I get time Is. I talk to them. His You Know I understand. Because I personally think that Finance is a very personal thing. it a it Cannot be generalized. One Portfolio Is Not Built for Everybody. But need to Understand the investor’s risk appetite What is? You know every man wants a return But those returns are also followed by drawdowns. Yes, there are losses too. are you able to Stomach something like that. And That’s Where Building That Relationship With Our Investor It is a crucial part and I enjoyed it also. That’s a part of my personality that I I enjoy talking to investors. You know how he earned the money. because When investors are coming with you know to me that means that he saved you know We are investing here. End That savings is probably generated out of thousands Business and you know through salary. So I enjoy Comes to talk to them and find out that they said, “You Know How Did They Get?” Here. So you know or broadly this is what I do. So 600-700 crores you have been Managing and you’re seeing that last two years You have achieved a CAGR of 30-31%. And where has Nifty performed in the last two years? So basically one or 2% means down like I Think has been negative or flat. So let us understand one thing now. So what about your There are strategies through which you can achieve this much Can I get more returns? and how do you Let’s Say Use Quant Investing in Order To make these returns? So let’s say the Audience here is that we don’t know at all What is quant investing? And understanding us through your strategies How can we also generate returns? can in a market which has given Flat returns over the last two years. Absolutely. So I think the one thing is a Efficient When You Look at Quant Investing The Fun Part of Quant Investing It Can Be Done by Anybody. So if you know you are active Or we’ll look at subjective investing. There Are People Who Are Really Successful But Behind That Success There Is a Lot of work. If you know us, Warren Buffett’s point is that you know you want to emulate What He Has Done and You Want to Copy What Warren Buffett has done is that guy spends 12 hours You know 14 hours a day reading 600 books He reads 700 pages and doesn’t go home until late. And you know since childhood he was 11 years old To now may be 94 95 he has been doing this And That’s How He Has Got There Ah But Most Of Us Don’t Have the Same Opportunities. K.U. No you don’t have the time. You have a job and You have other things to take care of. So you Can’t emulate that. Right? so what you No that’s what that’s where the am you know the Ah wee I was very curious k ok you No Is It Possible to Get a Decent Return without putting in that same amount of Effort. And that’s where you know quite and Systematic Investing Kicks In. Am so Quant Investing If I Were to Explain What Quant Investing Is in the First thing I you I might have said it earlier also That Quant Investing Is Not a Black Box. It is not that Rishabh has done any The formula is written and that formula is throws out the stock and you know then That Stock Ends Up Doing Really Well. Quant Investing Is More Than That. it is A Set of Rules That You Have to Work With in. The Rules and Up Having Flaws Also. There is no perfect formula that will give You the post perfect return. But it’s a set of rules and ah it’s a process that you know First you through your understanding the Market, you create those rules and then you put it down on paper or a python code or a Screener. Different ways of doing it. Even Through an Excel sheet. And then you come up with The Portfolio and Then You Follow Those Rules Here After Year. The Idea of ​​a Corn The process is such that you should keep your emotions aside. Given. I will follow these rules now. End I last 20 30 40 years of data I will see. So the entire idea is that you Want to learn through history. So what would happen Is that because we are young right? I am 32 33 Right Now My Team You Know Entire Team Has average age of may be 26 27 that means that None of us have seen 2008. End 2008 Was a Year Where You Knew Most People lost their livelihood they lost their Houses in the US We Have Seen People You Know They have to sell their houses also but does That means if I am not experienced I Can’t learn from it. This is what you know Quant teaches us that if I go Back in 2008, I looked at the data and saw what Kind of Businesses Did You Hel? What Kind of Businesses Did Badly? if if 208 comes back where it may be because of some Another crisis, not a financial crisis. Market fall due to some other crisis 50% as an investor what will happen to My Portfolio That Is the Entire Idea of quant finance that you can look at the history of You will see and from history you will get extra will say that ok these are the money in these instances These were made, money was lost in these instances And how I can position myself better for the Future So It Is Not About Predicting The Future It Is More About Positioning Yourself is one example that I generally give Is that for example you know you see 2020 So when Covid came, Covid hit all of us. By surprise, you know, businesses shut down and Nothing Was Working Markets Crash In 2020 There Was An Investor Called Red AO He is yet one of the largest in terms of UME Manages Largest Amounts of Money In 2020, he tweeted that Get Your Hands on Any Asset That You Can 24 from the end of 2020 we’ve seen absolutely Every asset has been done well if it is gold Silver, real estate, equities. So this question raises that red dialogue what you know how Did he get to know and how such a big figure Can you tweet something like this? So he tells That actually, you know, this was Covid. A very similar instance that happens in 1913 14 which was the Spanish flu and whenever You know, many lives were lost and lost. That Time What Did the Government Do? So In 2020, the Fed Balance Sheet Had About 4 Trillion End They printed about 4 trillion in a span of 34 months, then their balance sheet size is 4 Trillion Dollars It Took About 30 Years to Get there in 3 months they printed that Entire what they printed in 30 years Printed in 3 Months for You and Me Kushal This has become a very new thing, we have not Experienced It May Be Even Red Eye Was Never Experienced in His Life But If You We will read history when it became Spanish. The same thing, the same instance, repeated again. Was. Where they have their balance sheet Expended so much. Liquidity is so All try you know all asset put in the market Prices Went Up. Like my cousin who I used to live in the US, and that’s when I was like second year engineer I think University of Texas at and You know he called me and said hey you No US government has logged into my account. $600 is put down. And I said what is this? Is? Then I started reading This Is That Was One of the ways they were pumping in liquidity Into the economy. Give Over Transferring Money You can go directly to these people’s accounts. Spend to stimulate our economy Yes. When did this happen? This Was 2020 Around You No the end of 2020. So from 2020 to 2021 Till Covid vent on and off. Right? So Unemployment Went Through the Roof Everywhere Not only India, US also. So the only The tool that the Fed and the RBI have is Interest Rates and Printing of Money. Or So should I raise or lower the interest rate? I will print money. So the interest rate is Had brought it to zero. If you are a US Fed If you look at the interest rate chart, you will It will be seen that interest rates have come down to Zero. And if you look at the size of their balance sheet If you look at it, the balance sheet has gone from 4 Trillion to 8 trillion. So Kushal Hum You Know Talking about the Fed balance sheet Were. You’ll see It Was Around in 2020 four four trillion was the total size of the balance sheet and look at the spike that Happened you know we mouse there like I am Just Pointing the Mouse Right Now So You will see it spike to about seven and Went almost up to eight In a span of this was like three four Months. So this is the thing, this is a tool that gives Have and so interest rate ye zero pe la aa They went. I will also tell you the interest rate I will show you the graph. But interest rate is zero Pay le aa gaye the and you know printing of money Did it. So Whatever Returns We Saw Nifty was the next four five years. So From 2020 to around 2024 end, Nifty has done some 24 Taka CAGR was given. That Entire CAGR is a factor of liquidity. So You Know You Don’t Always Say That the Economy Has Groan. It’s also a factor, yes the economy has Grown because liquidity went into the market. And the Richa is getting richer because of that Because of that entire element. So these two Does the Fed or the RBI have the tool? Interest Rates and Printing of Money Moves the Markets. Now Spanish Look K The same thing happened at that time also. That’s How Rad Alio told that friend you know get your Hands because I am printing these and as soon as printing is done every asset The price will keep going up. so like you know This is the graph of interest rate. so if you Look at 2020. So pre 2020 if you If we look at the interest rate, then 23.23% long The term interest rate used to be. So This is the US interest rate. US The interest rate is. The Fed Funds Rate is called the FFR. And in 2020 it was brought to zero. O! Meaning you are skilled in the bank, you can go to the bank Are. Now he said give me $1 million. You get interest of 0.05% as good as nothing. So basically you are saying come Take the money. You have to spend, spend If you want to fly, fly. So this is basically RBI’s Just like there is repo rate, in the US the Fed There is a rate. Absolutely in the US Basically you know banks can borrow. So RBI How to calculate the repo rate in the So go to the banks and borrow above the repo rate. Can. similarly they have their own Financial system where the larger banks Can go to the Fed and borrow money. or you could Borrow at and then businessman could go and Boro from the Banks at You Know May Be 0.1 and 0.15 which is mean which was nothing Donation. so a but how you know how do such Extreme events happen because every time there is a crisis you know this This is the tool that they end up using. It This same thing happened in 2008. I will show You can see the interest rate for 2008 and 2008. Ah very similar situation happened so if you Sea Towards Or so end of 2008 so 200 you know April Till 2009 Yaar v u starting 2007 and interest The rate was at 5% and then you see it kept Dropping and hole of 2008 we saw the Crisis. Right Financial crisis unfolds. So What happened in the financial crisis? People Lost Houses 75% of the Stock Market So the government comes in to stimulate In the economy. 2009 Nifty was up about I think 65 70% in a year Wow. So all of these are stimulation tactics by The Government. if you understand all this Things. So coming to the point that what is The Point of Seeing All This Thing? Man you If you look at history, you will understand. Will come. Like you just saw it, you said hey This is very cool. So if you look at history See, you will understand what you know. It happened in the past that a crisis can happen anytime. So what happens? So That’s When It Happens Again, It Will Not Happen in the Same Way, It Will come in some other different form. one line It’s called history does not repeat Itself, But It Rhymes. Hmm. So, Maybe the Next Crisis Will Be Something Else. But Joe has two tools that There will be a movement that will be very similar. So You and I can be ready, that’s what we have to do now What is? How our portfolio is positioned Have to do it? So if I talk about 2026 then There is uncertainty right now. Joe Geopolitical There is uncertainty about crude oil prices Are increasing. Rupee is depreciating and current account deficit I think current Account deficit is fine but capital Account is a big problem where foreign Investors Are Selling Money Outside India. So this geopolitical uncertainty It is currently running in 2026. So according to you What should retail investors do now? According to your strategy, which end will you choose? historical event that you want to map You would like that through him you are telling that okay This is the thing that you should do now. Fair And so there are two parts to this. The The first part is that broadly if you retail Be an investor, you try to buff the Market in Terms of Areas of Euphoria and areas of pessimism. Now Every Time There is euphoria you need to just Identify it or not, this is euphoria. every The man is talking about this thing. These are very broad. I am saying these are non Data Driven Signals Because as a Retail Investor You Don’t Have the Time Also To Download this data and to see this. But if you Had to have some tactic in you know in your Pocket Than This Is A Very Easy Tactic. You Try to Identify Euphoria for Example Kushal can you tell me that today you No you are in the finance community you guys If you talk to me today, what are you talking about? They talk like what are they running After Today in Terms of Returns No Money is being made here right now at present Or I think who are you talking about right now? People are probably talking about gold etc. Are Talking about Korea Every person says that you know on every podcast This topic is coming out in today’s Inter How to do international investing? Correct, especially I think Korea, Taiwan, All these markets in Brazil have given huge returns. Diya last one and two years. Absolutely Absolute pessimism is where India is. Correct. And every newspaper has only these four Five Topics to Know About Your USD IAR Is over. We Don’t Have Any AI Stocks You know there is no future left for India. And this, so these are narratives that The Media Ends Up Creating and They Go In Extreme Cycles. yes it is correct that We are not in the best of circumstances, but What generally happens is that a little pessimism comes. Then the media has something to catch on to and then those topics are dragged on ah if you can identify that yes there is a puzzle here and There is euphoria there. Then You Have to Stay Away from Euphoria and Then Start Actually Identifying How Much Penalty Is There. that it’s actually so bad that is overstated. What We Feel Internally After all, the research is purely based on data that there are extreme amounts of Euphoria in the US It’s Not as Strong As the markets are reflecting like Everyday is up. As We Speak You Know NDC SNP 500 R at all-time highs. and it A Reverse in India. in India is we are In the pessimistic territory where everyone Person Is I Don’t Want to Deploy Money Over. I have to send money abroad. So You have to understand that whenever this happens The government will come up with reforms. For Example like as we speak Kushal I was Reading You Know Before This, now government of India, if you are an NRI and if If you want to buy bonds in India then Your risk was that you would not pay your bank No no, I gave him $1000 to convert it. ₹95 converts it into ₹95 lakh. And then gives you 7% interest. now then Where is your loss happening? USD IAR The government has just spoken on the depreciation of Diya, you put it, we will guarantee you know Depreciation means you put in $1 lakh and you get $1 You will get interest on lakhs Good to there is no so this they are trying to Get inflows into the country So basically the foreign investor invested $1 lakh If he puts it in, whatever the rupee becomes, he gets $1 Interest will be available only on lakhs absolutely him 10% will be available on $1 lakh Correct Now $7000 means he will get He will get $7000 and that too tax free. Government is what is in the interest The rate is 7%, so I gave you an example which Also, the prevailing interest rate is for NRR This is for government securities right government se so nahi ye the thing is that you Can do it with banks so if your HDFC Then you can have an NRI account with the bank Do it with the bank so ideally the bank is Providing that interest Ok So the risk is if HDFC Bank defaults and Whatever So It Is Not a Government Security Idle But It’s Pretty Safe We Because HDFC Bank is one of the largest banks there other banks also who are providing this and RBI hedging RBI says that it is providing I will control that which will also be depreciated. I will do it. That is my loss. RBI is Accepting. Now the next question comes That friend, if he did this then it was the last time. They Have Done This Was in 2013 When They Did In 2013 in the next one year IAR Appreciated by 8% means the it did not Depreciate to the dollar. Ok? So what you have to understand from These things are that whenever there will be pessimism Then the government will come to save you. They will Try to make measures because no government Wants to look bad. And Then Things Will Start reversing from there. I don’t know If USD IAR will you know what we will Continue Depreciation or You Know We See That 8% appreciation, but it’s something to ponder upon. Don’t go now with the same notion, I’m not here So 95 will become 150. like a lot of In podcasts, people say it’s 150. will become 160. But that is going with The Ganga is flowing. It flows along with it. You No, everyone is saying that we are bad. They will also say that it is bad. idea is that can You have a controlled approach then? we can you Think and Actually the Government Has Come Up With this policy like a day ago and two days ago Ago and they are saying that we will not try To control and honestly It’s a great policy because what happens that now you will sell dollars and buy rupees automatically Because you are coming into the country you are Saying that I put my money because you are giving Me that 7% so you are making the Rupee also stringer which inherently reduces the depreciation then and it’s possible that RBI did not suffer that much loss because Depreciation is decreasing. Like in 2013 The Rupee Actually Appreciated When It Happened By 8% so had you said that you my naked Keep the position that you know don’t give me the Protection. Actually, you would have got in a Better pay out. So it’s a great strategy By the RBI. So the idea is that you know one is that you figure out that you are in areas of Pessimism? Are you in areas of euphoria? Whenever there is euphoria, you step back. So Small cap and microcap in 2024 People had made a lot of money. We are every man Was talking to. Just How We’re Talking About International Markets Today. Eri Person coming to us saying that in microc So 2x 3x if we would speak anything in high Our fund has not given double digit returns If you gave 21% then people would laugh at you, friend What is 21%, we talk in X. So it’s see the thing is that it’s good to have This Conversation. Because then you understand It comes that ok yes there is nothing here I am feeling euphoria. we should take a step Back and that’s when we head then we look at All of Our Quantitative Metrics and I Will Show You One of the Matrix It Is Called a valuation indicator and we did that Valuation Indicators Ah Pay Clearly Everything Was Overvalued in 2024. So the Way We Make This Valuation Indicator Efficient Is k ah there is a price to book of a Company. So, Reliance for example has a Price to Book of Three Times and Four Times End Today It’s At Four Times the Price to Book Now what is its median price to book or What is the mean average price to book for the That Number from the Last 15 Years and 20 Years Is two times and today is trailing at Three Times So We Give It a Rating of One Dude today it’s above the mean and median like this There are 5000-6000 companies listed for each of them we are determining that today is one that Zero is it above or below and based on That we’re getting a composite number now I will show you for example in 2024 ok you See this graph in say you know towards October November When We Head Started The Funds and When We Launched Our Strategies August this number was 74.04% so if you see Percentage Rich Where the Cursor Is 73.59% What does it mean? 7 This means that 73.5% of the companies That Are There in the Universal Listed from 57000 companies are there. 73.5% R Trading Above their mean median price to book Value. Ok? So this number moves at extremes for Example: Now Look at the Extreme We Saw Recently Liked Look At 2020 2020 in March OK like at the bottom 31 March Approximately Was the Bottom This Number Was all 15% It came down to like 13 14% towards the End. Or That means that 80 to 90% of the businesses were Trading below the median best only 10 15 var trading above Things That Got In Really Cheap for Example This March Also There Was an Opportunity March of 2026 As you’ll see, there was a sharp drop. Or right, it came down to me, I think 37 38% 60% off businesses but trading cheaper than What their historical 10 15 average loss. This is a very broad indicator but broad thing is give you at least a sense and a pulse of the market where you see large Extremes and Decisions You Can Make Based on that. So in 2024 we are taking a Decision that we small cap micro cap I will not apply this at all. for example This happened to all companies. I will show you What was the condition of the micro cabs? 2024? Hmm. So micro cap that same number that we were Seeing We or Was at About Same 72.18% And Then We Saw a Drop in March. Today We r at around median levels. so not cheap Not expensive. so what do we do in general Are? We categorize on our end. Risk on Territory and Risk of Territory. What does it mean? Meaning that you will be driving in fifth gear today. You have to drive the car in first gear Have to run it. it’s as simple as that if You are getting a straight road where you You can run away where everything is clear Room for Accident is Very Low Let’s Move To Fifth Gear The Moment You’re Seeing There There’s a lot of traffic in front of you and It’s a Hard Road Ahead Let’s Move On First Gear Because We’re Running With This Principal ke ah pahle to na us risk Have to manage. Like Warren Buffett’s Joe Do The rule is don’t lose money. The second rule is don’t Forget rule number one. Right? So when he says don’t lose money what he stand says that Your Entry Point Is Most Important Because Only That is under your control as to when you enter That is under your control in the market What happens after the market goes up 20 taka will come down you don’t know tomorrow nuclear strike what will you Do Right So When You Enter Matters the Most So we decide that for example In 2024, we decided that we would go micro. Caps will not touch weather even if the Investor Says I Have a 10-Year View I Am Willing to see 50% drop in my portfolio but you na mujhe microc hi Give it to me because I know you know a lot about it. Money is made. We will say that we will not I will do it but when the time is right The timing is right until we move to a Safe Portfolio That’s When We Had Allocated to Larger Businesses We Had Allocated to Gold We Had Allocated to Bonds and we created a very safe portfolio out there what was the Advantage of something like that to 2024 and When the market fell in 25 25 and 26, we did Don’t lose any money and then you know as you saw a Little Bit of the Bounce Back We Ended Up Making a large part of the money. So when Everywhere it was losing money we ended up Saving the Large Drawdowns, the Large Losses. We did not see that. Emotionally it is Very easy on the investor because if You know 20-30% in the beginning itself Investors lost money, it became very Emotionally Hard to Manage Also to Recover From There to Give That Double Digit Return Becomes difficult. So the idea is that you can Determine these levels? Now We Have Quantitatively define these levels. so like this It is never that Rishabh will come to the office today. Disguise that you know guys I’m feeling That friend, the market has become cheap. no it Needs to be an objective process because Everything Can Be Defined If Not in a Formula But By Looking At Basic Things It can be defined. Like you did this chart See at least extreme territory then you Will understand. So whenever you reach 25 or 30 You will tell me yourself Rishabh, It seems very cheap. But you understand this when He will come on 25th, everyone is talking negative. Will be. Don’t Expect at 25 People Will Tell Like no, our economy is very good. This is the growth phase. When in November 2024 This number was 73-74% of the time. I was wondering what India’s growth story was. Is. India in the next 10 years It will be transformed and the bullet train will arrive. It’s about to end and it’s about to end Manufacturing is India. China Plus One The story happens. All the Positive Stories Come up. That’s When You Look At Valuations. You look at there is too much Of Optimism and We Can Take a Step Back. So This Entire Thing to Do Subjectively we find it very hard. I think this after reading the newspaper. I can’t do this thing. Consistently may be once and twice push and I can do it. But if I were to do it for 15 20 years. Ideally, I do this thing Can’t do it consistently. so that’s Why We Have Determined a Math. thats Why today if an investor has us If the investor comes then they are not dependent on Rishabh Naz Intelligence. They are dependent on how good the system is. So when an investor comes, we always Let’s talk about the system. which I I’m showing you, I tell every investor I will show you. This Is a System We Try To Follow the system. Sometimes a system will do Well, sometimes it is not, but on an average If I have a 60 to 70% win rate. So six Out of Times of Seven of Times If I Do With, This Is the Kind of Return I Can Generate. The Idea Is Not to Hit the Ball Out Off the park. The Idea Is to Have a Process And then consistently follow that process. So you mentioned that this valuation There is a spread indicator through which you know Let’s see what to do now. In the markets. Apart from this, what other indicators that you use in Order to decide whether to invest now should should not. can you also Show some other indicators. So this is one of the There are many indicators now. There are variations. For example, this The indicator is coming up with the price to to book. We use other metrics like se price to earnings, price to sales. Ah, V Try to look at the trend indicator too Figure out where the trend is today? Ah You No, we are in the up trend, we are in down. Trend. One thing that happens now is that Valuations are very expensive. But they can Remain Expensive For five years also. so does that mean that I should leave during peak hours. it you know that means That I Need to Stay Invested. Because if As I told you, the liquidity cycle It’s where the Fed did a lot of printing. If done then the valuation can remain Elevated for Extremely Long Periods Off time. So out there we end up using I Don’t Have It Over Here But Out There We End Up Using Trend Indicators to See Where Is the Momentum in the Market So You Don’t want to go against the tide also say It is very expensive, I will not short it. It Doesn’t Work Like That 2005 Market Remains Elevated Since 2008 Remain Elevated for Three Years and They Were At Expensive Valuations But There Was Too Much liquidity if there is too much Liquidity That Means That Ah To Many People Chasing two few goods so he elevated will remain so for plus the exit signal comes When Two Three Things Are Together Flagged You know, evaluation has also become expensive. The momentum also changed that now people have Started you know the SMS that’s when we and up exiting and then we will enter at Extremes So the Moments Are Not Very Large is not like that you just now I said in January Changed it, then changed it back again in March Dia generally the cycles go on for two three Years hence the movements are slow and we prefer it to be slow we are not looking at drastic changes so if I speak If someone has quant then people think I am trading every day. No That is wrong. We you know we move really slowly. We Just Say Quant Because We Are Looking At Data to Predict and to Position Ourselves. So right now at present, according to you, whatever is yours If the quant model is speaking then you said that Markets are not overvalued right now Undervalued because of its price to book The ratio has come to mid like 45 47%. So Good Strategy for Retail Investors Right Now would be to wait until a correction comes And just keep parking late money. what to do Did he want it? So one thing is that we Never bet on cash. The reason we don’t sit on cash is simple. That we have to understand the situation of the US. So Kush contains two or three things in it. One is one Markets have a big long term cycle Of and economies. You are saying that you We don’t seat on cash. means you Basically you always remain invested. We are always invested but it depends on the Asset. Ok. So always invested means we are in FD. Don’t invest money. Or don’t invest money in bonds. which we Feel It’s a Silly Idea to Put Your Money In Bond. I will tell you why a long term The bicycle remains. We Call It As A Long Term de cycle. Now in the US we are Coming to a point where we were an 80 90 year The cycle is coming to an end and that means that You and I, this cycle never ends. have not seen. For Us It’s Very Fresh Very few people may know me Grandfather and my great grandfather wood Have seen the start at the end of the cycle. So You and I May Be Even Buffett Is Seeing It For the first time. What is in this bicycle? It is being said that the US has spent so much money Printing has been done that they are having a Day Crisis. So now the balance of US Sheet give them have a day book. I’ll Just Show You The Day Book Right Now Give A Total Day Is Around 39 to 40 trillion dollars in his book That’s a Day Book. That means that 40 trillion Give dollars to the public. Ah it could be Other countries. A Large Part of the Day Is Held by China, ah other country India, Russia, Etcetera. This is about 11 trillion out of 40 trillion. Have to refinance next 1 1/2 years In. Right now this refinancing activity which is So This Is the Dead book just to let you know if you Look at the number it’s about 38.5 trillion Right now. So this number has been increasing. These It has never decreased. This is absolute Number. There is another number called Dept To GDP. Ah dept to GDP is around It must be running around 130-140% right now. This number It has also been increasing. That is the alarming one. The absolute number may increase. Butt Dept to GDP I will just I will just Present the number. Or so we are at I think What 121 Right Now Were Total Dept 122% GDP of US and US GDP This Is Where Japan Was In 1980 Today Japan Depth to GDP About 200% Last 30 Years What Has Happened To Japan. Nothing has happened. If you were in 1980 Imagine if you were going to buy a house in Japan. It was $1 million dollars. Even today, that house is $1 million. I am going in. like that thing in India Not there. Right? If you know South Bombay I will see a house worth Rs 1 crore become worth Rs 5 crore. It has gone or it has become worth 6 crores over the last 20 This has happened in the US too. Butt In In Japan there has been no growth. So as much as Meaning everything has been out there only. So That’s why if you see them there were very aging Like there are there have multiple problems Aging Populations Extraterrestrial But Ware Japan was US is today they are having a Dead crisis, so right now this $11 trillion Out of 39, these have to be refinanced. Interest rate is going at 45% today so when They took this $39 trillion only then The interest rate was $1/2% interest, so that Interest was being paid at 1 1/2% If this 11 trillion rupees have to be refinanced now This will become unaffordable at 5% at that Kind of interest it’s unaffordable. So the Only Way to Come Out. So the Way It Works Is That Trump has become notorious right now. Assuming that you are China, I am US. And I come to you. i you I say, isn’t this 10 trillion? You have to give back. Let’s do one thing. Now Let’s push it a little. We this Let’s refinance it. I wish you 10 years I will return it after. China will not say anything. You know you have become a scoundrel. my money my Give it back to Right? Because friend, you will wake up tomorrow You will raise your hands and say that I will not give you the money. One. What will we do? You tell us that we We will wage war. This is that you know. So we don’t Want you give a money back. So I Need to Repay You. So this US has done different things like this to China and so on. Taken from countries. There are many countries. And No One Has Faith Now in the US. Right? No One Knows What He Wants to deal with them on a day-to-day basis because They can do anything. so they are saying that now You give my money back. So other option is that I dude either stick this date to someone else. So we call the cameramen we have. Paste. brother you take it You Know I You Give Me the Money and Other Options I do one thing, I don’t tell the Fed. You print it, you have the machine. Print it and we will give those dollars back to China. If you give it then when printing happens it’s like A liquidity injection into the system if Printing Happens Prices of All Goods will go up now from all the math that most Of the people, I haven’t done math. It’s Very Likely That They Have to Continue Printing Money and the Rate of Printing Will Be a Lot More Than What We Saw in 2020. Jo 4 ka 8 hua na, it will be Pre Pre Probably double of that now. End If That Happens, the Price of All Assets Will Keep going up. That’s Why We Don’t Want Two seat on cash ever. So, Things Can Remain Expensive for extended periods of Time. So, the other option is that we end up Buying Gold on Our Portfolio. The Reason We End Up Buying Gold in the Portfolio Is. Your long term returns from gold We will see in India. Gold has given 11 12% on Enum from 2020 to until 23 before This crazy rally until 23 gold has been given 11% per annum if we break even on that return Will come down by 7% due to inflation 3 1/2% comes from currency depreciation Let me show you something really cool TradingView Pay Gold in USD Terms and gold in mcx terms and its What is the difference in return? Lots of people. If you know they don’t know this, what difference would it make? Is Gold in USD vs Gold Yes. So Let me show you the returns. Then you are mine Tell me what difference does both of these make? Deez. Meaning there is one gold for US dollar In price. Yes. So now for example Running at $4100. And in India it is traded on MCX. Is. So I think so ₹140 or ₹150,000 per 10 The village is running. ₹1.5 crore per kg means you get 1 kg I will have to sleep. So I have to give you ₹1.5 crore. Will have to. So 10 grams of something one end 1.4 Lax to 1.5 lac so I will just give you the plot I do. 20 Year Return from Let’s Look At Ideally, sea gold is that commodity. We I am talking about 999 grade you know its The gradient comes. So ideally the return It must be beans only. So what happens is this 999 grade so C there is a grade ah gold Basically, gold is mild right from below. The Earth. So ah if you go to the jeweler You will get different grades of gold Will meet. There are generally two variations. one then Poreness of 999.9 remains. You will never have 100% purity because it is derived from earth. There will definitely be some mineral in it at least 0.01 Will remain. There is also one for 995 and one for 990. Also comes. What We’re Talking About Right Now Now in terms of price that $4200 is going on or is running at ₹1.5 lakh. That is of 999 Pority. Meaning if you invest ₹1.5 on MCX Taking a futures contract for a million dollars Will have to. You will not get a spot. ₹1.5 I paid one lakh and you stayed till the end of the month. are. So if you go to take delivery will give you a gold bar. That gold bar is of 999 purity. Only then you will have to pay GST of 3% which you Price is showing without GST right Now. Ok? So right now Gold Weather India and US Price to be the same only in terms of The Price Appreciation. Right? But now I will Show You the Difference in the Price and What That Price Means. Kushal, we were talking about gold. So we Let’s compare that in USD terms and What has been the return in IAR? Absolute Right If You See From 2016 till now in IAR terms you 452% return in USD terms 239 There is so much difference. Yes, 45 2.74 which gives you 239% ok Ideally the commodity is the same. Your holding is the same. Differences There Pay It Is in USD Terms Versus Here in IAR terms. So what we Additional returns are being received in India. Is accounted for currency depreciation. I will give an example, very lemon To understand this in terms of your You have ₹1 lakh today. ₹1.5 lakh Is. You took a 10 gram bar from the jeweler and placed in your locker. Correct Is? The moment you transfer your rupees to Gold Now You Are You Are Full Proof of the Rupee. Whatever happened to the rupee now, it was because of Modi ji. Whatever you do, it doesn’t matter to me Does matter. We Because I keep this 10 grams in my pocket I should go to the US. In the US I give I can get any currency in front of me. You can get dollars, you can get bitcoins. I can get absolutely anything. so I have Nothing to do with the Rupee. So the moment you R Buying an Asset. See you are buying land, You are buying gold. you are exiting the Rupi and you are buying that asset. And now That Asset Becomes a Storehouse of Wealth For you. So It Is It Is Sort of a Future Proof Against the Currency Depreciation. So India Long Term Gold Return is 11% 7% The Way I Look at 7% Is Inflation and 3 to 4% is the currency depreciation. 7% increase from Rs. The global return of 7% per nm to global Your return is done and you get 34% Got it in rupee depreciation. Now I will Show you something more crazy. Let’s Look At Gold in Turkish Lira terms. Let’s see what have we done we were just talking that we do not invest money in debt and if You go to Turkey and start your podcast. So currency depreciation in Turkey is very It is too much but if you go to Turkey and buy gold If you buy, look at the return, you have got a From over the period that we can see in the chart You have gained 269% in USD since 2016. Return received on gold but in Turkish lira terms you 5420% Return Oh my god so what does that mean like if I UA He would go to the US and buy gold and If I had sold it, my gold would have given me a return of 269%. Hota over 9 years in USD terms In USD terms that’s what I went to in Turkey I bought gold there and then I Gold sold in Turkey only, correct after 9 years So my return on that gold was 549%. Yes, so now for example in Turkish Lira Gold price is changing every day Yes And it is appreciating a lot every day Because the Turkish lira is depreciating Lot. Okay, so let’s say gold if you agree Chalo Gold was 100 Turkish Lira in 2016 This is the gold, 2000-3000 Turkish Right, you will need more liras to buy gold Now over a 10 year period like you did The example given is absolutely correct. Cheese Pakistan also holds also for Example you know which is the one of the Most Highest Performing Stock Market In the world you’ll be surprised it is the Karachi Stock Exchange I will show that also KS 100 right now too You so it’s called KS 100 And all this is thanks to currency Depreciation. So every time you are exposed to currency Then you will face a lot of problems in life. You have to withdraw U Know from the currency. thats Why You Want to Expose Yourself to An Asset. So either equity and gold and any of That. Bonds Are One of the Most Risky Things. Bonds actually give you 7-8% Return. But if you had bought the bond You know, in Turkey or in Karachi, and if the Interest rates were lower than the Depreciation You Would Have Got Eaten Killed Your purchasing power would have ended. So See This is the return of the Karachi stock Exchange. Let’s look at from 2017 the The price was somewhere around 30 or 40,000 Exchanged from ₹40 to ₹1.69. This is the index. This is the index from there. Not even a stock. Because the currency has depreciated at like May B. 20-30% at N. So currency like you The risk of currency depreciation How do you tackle risk? In your personal life, what do you do so that No risk of currency depreciation should simple like see if if there are two Right now in India there are two major Three Major Assets: One is yours. Real estate became third and gold became second. Gold is gone and equities are the third option for you. The choice between these three is as of today And fourthly, Bonds are Bonds, so we As we speak, these three things do not have to be done. The problem in real estate has become products. That there is a problem of liquidity and Ticket size to buy for everybody. means one You won’t be able to do anything with two crores. And that too in real estate in place like Bombay FSI is unlimited. Meaning BAMC said yesterday that you know you are 200 males You can build a building of Rs. It will take all People want to build a 200-storey building. Because it’s on the way. So the only Real Estate That You Could Have Exposure To Is Land because that is a limited resource. So This is a simple principle of life that whatever Cheese is in limited supply, its price The chances of growth are higher. Right? so if there There are a limited number of businesses out there. Want to have exposure to those businesses. The The way I look at it is that I rotate my money between these two assets which is between Equities and Gold Today. friend, me sometime I want to buy equities, sometimes I want to buy gold Is. If I have exposure to land that can B. Great. But obviously that is harder than All of these other games. What is in equity Nor are opportunities available very easily. And you can have exposure to a variety of Businesses. So, the way I tackle depreciation In my life is having exposure to both of These assets. But the question is when You want to have exposure is the Mostant. that when it’s the same thing that Comes back is risk on risk off. Sometimes Fifth Drive in gear, sometimes first gear I have to run it. So what is your personal asset allocation right now? Is? Which assets should be percentage wise? Large Part is say like about 60 70% is Equities and about 30 to 40% is gold Today. Good 40% 30 to 40% of my personal portfolio. It Comes Walleter. For example, as we speak Gold is seeing a drawdown of 15 to 17%. Of. Meaning as we are speaking you know gold has seen a have seen a beating. So what are we We generally do it for 15, 20, 30 years. Let’s see if I were to mix it up. What kind of Equities and Gold do I need? Did you get returns? Like what kind of Returns What Kind of Drawdowns or If a very bad year comes then you know How much can gold fall? at that time How far can equities fall? And can I Bear that loss au not. So Mentally I Have Seen Or not friend, someday 30% will go away or 20% will go and then I have to tell you Decide how much I need to risk that if 25% Am I okay to see the loss I should Not Lose My Sleep and Yehi Sawaal Hum Hamare Ask investors too. Ok? Good All is well at the Times. we have Enum last two years at 30% generated. thats Great. But If Things Go Bad, You Know How Bad Can They Get? And Are We Willing to See It. If an investor tells me that Rishabh is not I Can’t See More Than a 10% Drawdown. So We Have to Desire His Portfolio That Way That. We have to play safe. I Can’t Be Aggressive. I can’t put I can’t do allocation Two microcaps. Because microcaps are low With its fair share of volatility. that means that even if they are available cheap Might not take exposure because it will come With Volatility and the Investor Is Not Ready to see volatility. So that’s how we end up designing a Portfolio. This is the advantage of End Quant We can design anything. So What will be super interesting is that if Can you show us a live model? How do you generate returns? so we also Make their models using coding and all. Absolutely fine. So You Know Before I Show You the Model and How We Build a Model We How to make it in Python? I am one of you I want to show you how did we end up Up stumbling upon quant investing and Like you know what creates a case for Quant Investing. So, you see that You know there’s a number 81 out there and What That Number Signifies So Top Most 81 Doz R 81 Different I Wood in the Corner From Strategies and Schemes and Different Funds Managers with in the PMS industry have come Have been running for the last 10 years. So Out of 81 Life Schemes We Have to Try Take Almost All the Strategies That That’s That That Are There for the Last 10 Years. So 81 are there only 26 have beaten Them and Beaten the Benchmark Over a 10 Year Period That Means That So That Number 26 / 81 Comes to 32% so 32% of active funds Managers Have Managed to Beat the Benchmark That means that 68% have not beaten the benchmark In that same period now the question comes they Who is who won them right so which funds Managers are these PMS these are all PMS Active Fund Managers You Know Who Have Ever Known Been Running the Strategy for the Last 10 Years. Ah we had this data for five years, And It Was I Think It Was Worst Than 32 Also. It was probably like sub 20 odd percent, 13 14% was some number like that. May Be Next Time I will send you those numbers but we thought In may be you know five years people are Not convinced. So let’s look at 10 years data. So, over a 10 year period, only 32% of the fund managers have been able to beat the Index or the benchmark. That means that 68% Of Times the Benchmark Has Beaten Active Fund managers. So the question arises that then What is the benchmark really right? So from this Do we know there are two broad conclusions That we have come up with one is active Management is hard. There is a case that There are those 32% fund managers who are good at what they do and they actively meet in the Benchmark and May B from their work to them There are processes that they can actively beat but On a Majority Basis It’s Harder Right So The Question Comes and What Is the Benchmark The Benchmark at the End Is a Quant Strategy Itself What That Means Like Say For example, let us take the benchmark Nifty. What did we do in this case that The benchmark of strategy for Example: If you are a small cap fund manager If its small cap benchmark is large If there is a cap, then maybe Nifty should be its benchmark. Went. So let’s take Nifty. Nifty is a Set of 50 stocks. Ah how do the 50 Stocks Go and Come? you know they are determined Based on the market cap. So free float that Also, the market cap remains based on that you No whatsoever the largest will have the Highest weightage and the top basically they are Around the Top 50 Businesses. But there is no Fundamental factor in this question. In this It is not that you know this is the promoter of the company 70% holding and its return on capital On the business is this and revenue growth is This is based on which we are taking it in the Nifty. It’s actually a very silly Quant Indicator and It’s a Very Silly Quant Factor Method to Determine What You Know What Should Be in the Portfolio. so what We thought that was okay. If such a silly Index Can Be It Active Manager 68% Off Times. Let’s Make a Smarter Index Which is what we call a quant strategy? And you know so that’s why we started That’s How We Started Building From That. So when I started in 2017, I I started with the idea that okay, right now We have a base that we can buy the index Yes, and in the index also we get 12, 14, 15 taka Can give. We can do better than that. Right? So we have the base that The index gives these returns. If I add more Factors layer by layer and cover add a Little Bit of Intelligence. Not You No Need To be too smart. A little bit of your intelligence I will add it. IQ of 120 to 130 Will work. So maybe you will come up with something Descent and you know I’ll run you through the Flow of How I Build It. So we generally give Let’s do something. We have a tool called It called portfolio visualizer and this is A sort of an internal tool. But not nowadays Efficient means you have to do back testing. It has become very easy. like you know Clouds are beautiful. So You Don’t Need To Be a Coder Anymore to You No Do Back Testing. All you need is raw data. Once And there are many good paid data Sources from where you know all so of Fundamental data is available. better than Screeners I would say more than screeners that you You know using on the go. But if You need to backtest the last 20 Years later, there are good data sources where We download it and upload it to the cloud. You can also write the code by doing this, you know so we have This tool is called Portfolio Visualizer and What we will do in Portfolio Visualizer I will first show you the results, friend. These are all the results, so we’ll start the trick. From the Universe to the First Universe That I have taken these companies from the market Cap of ₹500 crore to ₹2000 crore ah in end You know that is the universe that is ah that will Probably 75 to 80% of the companies that Exist. that are listed today and Actively traded. Reason I am saying ₹500 Market cap above Rs 500 crore I may also get some volume. End Region upper band is 20 that can be 25 30 It does not change the result as much. So the First thing is, in a 500 and 20 Approximately Today If You Were to Buy All The Businesses. There are about 34 thousand Businesses That Come. In Assuming Equal Weightage You would have bought everything. So What Kind of result you have generated over the last 10 to 12 years. So let’s look at a period Like from 2013 to 2024. So This Is More like a simulation exercise you know what Kind of Results Come Out and This Is Us Internally we do this every day. We have a lot of fun comes to because you know we see All different data points. So See So We Start from 1st August 2013 and end in From first of July 2024 we will Just change that so I’ll just end it in 2024 and you know that you had invested ₹1 Lakh and that 1 Lakh was divided across 3000 Businesses Equally Equally. So Obviously you would need a lot more than ₹1 Lakh to buy 3000 businesses because stock Price even if you take each stock individually. But Because our formula contains fractions Assume You Can Get the Same Result If You Had From. So Let’s See What Kind of Result We Get Wood have generated. This is where there is no thought Process in this. Our we have just put a Market Cap Filter. So what we have done in this is that 1000 companies Sorry, how many companies are there? 3000 We have applied a filter. Equal money has been invested in 3000 companies. And Are you doing SIP or investing it once? I invested the money in just one shot. 3000 companies 10 years ago, how they came to market There are 78000 businesses in it. We said that only Any business ranging from ₹500 to ₹0000 crore comes We will buy them all because we don’t like small things. To create a cap portfolio. Ok? Small and mid cap. Ok? So you will see that the universe returns. 19% 19.01% Good. This is a cage. CAGR Drawdown came down to 61% So what does this mean? 61% draw down means What? at some point in time from the peak value Your portfolio fell 60%. and this Vaz 2020 March 2020. Where index was down Nifty was down About 40%. So when the large cap was down 40% or small cap was down about 50 to 60% Anywhere Between That. And then there are obviously many others Matrix But Let’s Just Focus on CAGR Now just to see that you know something is silly S Just a Market Cap Now the Next Question is efficient if you are stock picking If you do something, you know you know something about there. three four elements the first element is you want a growth business man you want a Growing and You Want a Good Quality Business. So what we will add to this is a Quality filter. Now I am not Disclosing What the Quality Filters are musical but I will give you a hint that It Is Somewhere Around Revenue Growth Margins Growth and Earnings Growth Businesses That Are Growing I Just Want To Pick up those businesses I don’t want to pick Up Degrowing Businesses. Hmm So My Universe Will Fall Now Because I Have Added one filter, earlier it was 500 to 20. Now! I added the filter of Growth and Quality Gave. So now my may be 3000 will come down To a lower number. I’ll show you the bars too what that number comes to, but let’s look at the result. Just before this. So this quality How did you calculate it? So growth What is the percentage and how? Now how is it that you have, say, 6000 It’s business. We first filtered by market cap. 500 to 20. So we got 3000 a business. Now I say that these three 3000 businesses All I Don’t Want to Buy. I am adding a Condition K Se for example the revenue Growth should be positive for the last three Quarters. And the earnings growth should be positive for The Last Four Quarters. Hmm and the margin should have expanded over the Last Three Years You Can Use Anything This Is a Fairly Simple Exercise Now It Depends on person to person what kind You have to make the model Correct Right Do You Want High Growth Businesses you want cheap businesses you know the Another filter that you could use which works Very well is return on capital employed Like you want to buy businesses which have a Return on capital employed of more than 12%. Because Ah is a simple concept Chalimeli talks about Mangal The Long Term Stock Price of a Business. Will Match The Return On Capital. The Business Generates over that period. Right? it’s a Very very simple concept. So, return On Capital Is A Great A Quality Filter If you want to add. So, as soon as you Filter added, your 3000 businesses Will Fall. So, I’ll tell you, you know, I’ll just Show in terms of the graph how the life life The bicycle will look. Yes, The Total Universe Was 4,000 businesses. We sized it to 1200 Had come to the company. So our 500 to 20,000 crore is our universe now that if I to buy The companies I am and this number is an average Of 10 years. You know every year you are doing Dec. Then I am adding a quality filter Tell me friend, right now I am only focused on revenue growth Should I look at the business with higher returns or should I just look at returns I will look at businesses with on-capital. So I came Am left with 1128 businesses. So Let’s See The Result for If I Just Add the Quality Filter. So 19% CAGR goes to 24% we Straight away there was a 5% appreciation Because I say I am just good Companies Pay I won’t catch a bad one This is from 2013 to 2024 It is from 2013 to 2024. Ok? That’s if I If I did 2026, it would be 24, I think 156 or more. 15 is not 16. I’m Assuming K 1920 This is the difference in CAGR till 1920 It doesn’t matter. I’m assuming that the last two years will be a draw. Down Wood Have Been 20% and Current Drawdown of small cap index is around 15 16% so On top of that, you lose 15%. But your CAGR would have been yet around 20%. But What’s important is what you see relative to The Index at All Points of Time. Because that is the best option you have today. Or else you compare to the active fund manager That’s how I can move ahead. Ok? So, it turned out to be 24. right now you You say there is another element that Valuation. At any price, I I will not pay for quality. means business It’s very good. Your sandwich business is very It’s going well. You earn ₹40,000 a year had been. But I will not pay you 10 lakhs to Buy this business. So, I have to enter a Valuation. Now That Valuation Filter could be as simple as ‘K I will not’ Buy businesses, above a certain price to to book. and I will not buy business above a Certain price to earnings. These Are Fairly Simple. Can get into more complications. But let’s see if I really have something Simple. What does that result go to? So what’s in it for you? Price Earnings, Let’s do price to book price. Price to Earnings EV by Beta. Three or four of us Let’s look at the ratio. His Hum A Little Bit We Give Weightage to each of the factors. And then we Deicide’s You Know We Will by Only These. So how much should it be ideally according to you? From? Price to Book EV bit. Ideally, you have to look at valuation in Relation to return on capital. You Can’t Look at plain valuation. for example For example, all the paper businesses there are today West Coast paper done they all generate like A 14 15% and all like 12 13% ROE so like this Businesses Can Be Run To Two Times Three Times The Price Two books are not given on May Be Two Times Max for example Bashai Hathaway Goes At Like 1.5 Times Price to Book Because Its size has become so big Growing like Asset B500 they are growing At 89% per enum so they don’t get much of a Premium but if a business gives a 40% Return on capital it can go at a 35 Times Price to Book Also 40 50 60 Times Also Like G. Vernova By A company is they are involved in putting Transmission Cables Across the Country and Their Growth Treasury Is Crazy The Return On Capital employed is very high like 60-70% Return on capital is its price to Earnings has gone up to like 60 70 80 Times also so valuation is a factor of the return on capital employed and it is A Factor of Future Earnings. So what are we We do? When we look at valuations, We normalize that return on To the capital employed. But let’s not get Into that complication. Let’s fill at a Simple Flutter 40 Times Ke Upar Me I will not fill it. Price to Earnings. Nothing complicated. The Return Goes From 24 to 25.81 And how many stocks are there in this now? Or. So the number of stocks obviously will Go down. So We Started With 4000 to 1200, 1200 to 128, 188 to 85. Ok. Now let us bring one to the last factor. Here’s what I really enjoy: momentum. That one thing has happened that because we We have a quant mechanism, we don’t know. Of You know what the market is like and what the The market doesn’t like we’re not going to end Meeting the Management and Generally We Have Seen Price and results of Ace Fund Managers Everyone knows that he runs away beforehand. Because inherently the business owners and they Associates and People in the Industry Know Its result is going to be good. Not Because there is an infection inside unknown but also Because the industry overall is doing well. like yesterday I was speaking to someone investor and he was telling me that Rishabh, I earned a lot of money. This year like this how to earn? Hey Saying, I knew that So he is a distributor for SSDs and GPUs and graphics cards in India. And he saying that Lenovo has ended he Distributes laptops for Lenovo. End He is the large distributor best Offcuta. He told me that Rishabh is there Lenovo itself told me that we I am going to get the full price. Our The demand has shot up a lot. So generally I keep an inventory of 50,000 laptops Of. I bought and kept laptops worth Rs 3 lakh. And which is true, like recently we Bought a laptop for our analyst. That Same Laptop Wed 40,000 Last Year V Boat it for 75,000 this year. It almost doubled. Almost doubled. Because the price of all the internal parts have Gone Up Because of the AI ​​Demand. because all The place everybody wants processing capacity. So as an insider lot of people new six Months ago only and then they to advantage of That. So lots of times the price of the stock Run up before the result is out. So, Momentum helps out there. So, we looked at First we took the universe. Then we had a Quality filter applied. Then we have a value I called and said that you are a cheap company. Should I buy it or should I not buy it which is very expensive? Thirdly, we say that this stock momentum Should be in. So That Result Goes From 25.1 to 28.9 so this should be in momentum Needed What does it mean? This means that the price should be running up over The Last Six Months Over the Last One Year. There is some positive price movement. That means may be inside our buying institution are buying and we want to be a part of That. You Know You Don’t Want to Buy a Stock That Is Falling. You want to buy a stock that is moving up. But this is what happens in momentum, isn’t it? Six It’s been a long time, months. like in the Can take different time periods. Honestly See like what we have seen 3 months work, Six months works, one year also works. We then ended up taking an average because now This is an element of curve fitting. back There is a concept in testing that friend The backtest you did is only good. For that data set. So generally we are different Type periods take and then merge it Let’s try it. What will be the result? So we We look at this factor called volatility Adjusted Momentum. It is a very common Concept. Everyone knows it. Its ETF Runs are scored only because of momentum. Momentum ETFs adjust for volatility in them. What if a stock can move from 100? to 200 over a one-year period, but what the Journey was different if it was from 100 to 300 Went to 300 and came back to 100 and then end I reached 200 so it will not get a Very Good Rating It Will Get a Negative Rating where a stock has moved Up consistently it will get a better rating So you are adjusting the movement that 100% move from point A to point B by the The volatility that it has seen over that one year Period, so you want a stock that is moving Up Consistently Because You Want Stocks where the actual earnings are coming from There is no speculation. So his too There are variations. But I am telling you all Simple Things Nothing Complicated Right Now. So we added three or four filters. Quality Plus Valuation Plus Momentum And we came up with a 0.3% result. Wow 10 Year Cager 28.93 Almost 10 years, right? Without doing much. Now the question is, I will tell you once again Let me show you how to do this in Python. Build Tax I have a million dollar question to ask So, which 30 are these 30 stocks? Stucks were So, I will show you that as well. What types of businesses are there generally? What Happens to Something Blindly You Shouldn’t Follow a back test What you should do is you should go into it. You should know what kind of businesses are coming up now. Are the actually fundamentally sound businesses And the companies they operated ran away just like that Right, I was going to ask the same thing because in this Right now companies through your data filters so It will come but you have to also study that yes I mean, what’s going on in some companies? Do you not know the fundamentals? And that at least you try to do ground OK of level checks and top level checks Half are cash flow positive businesses so what are we We do? For example, our and pay hum We Try to Match Cash Flow to the Profits Off the business. that you know cash flow should be significantly High as compared to the profits. and it should B. Matching the profits at least. because If there is a lot of mismatch, there is a chance of They have committed fraud, they have recorded the sale. Kar diya books pe but your dater cycle The profits are very long, so the books are visible. But actually the cash did not come home. These are things as you progress on the journey. Of Conference You Will Start Understanding The idea has to be to start where you start. are doing then you keep adding because when You will invest, you will realize this types of businesses come or these types of businesses Come. So I’ll show you like you know let’s Build Out Something You Know Let’s Build The Ultimate Model We Have The Quality Plus Valuation Filter OK and Done Before Skilled Before You Go To This One Thing I Want To explain is one thing, it is a big notion. It happens that people think this is entire Investment Business Is Only About That Which stock did you buy, but there are There are actually five elements that you need to cover First is which stock you bought and second is How Much Do You Want to Buy Third Is When Do You Want to Buy It Fourth Is When You Want To Sell It Fifth Is How You Want to Manage These five elements will give risk and will make You are a successful investor. for example If Kushal, I recommend you any stock Did. Right? But I did not tell you What price to enter at. I I never told you that you have to exit. I Did you know what percentage of your portfolio Should be in this stock. then there is no Point of my recommendation. Because you have It is 100 crores. You invested Rs 1 lakh. Then he It also became 10X. It Will Not Move the Needle For you. So, all these elements are very Nicely Covered in One Quant Framework. End That’s Why It Makes Quant Easier Process Eye Wood Se. So I will show you For example, you know, let’s take the same Start date and end date. So first of July to 31 of December 2024 is our Period. Ah we have a minimum and a Maximum Market Cap Filter. so every Time We Are Buying a Stock It Will It Has To be between 500 to 20,000 crores. that Means that is above 20,000 and below 500 If there is stock, we will not take it. On the basis of market cap. A Hum Rebalance Let’s rebalance the period This Portfolio May Be You Know Can We Do It Like once a year. So once a year we will Rebalance this portfolio. So or so this I think the terminology is Wrong But Ideally Rebalancing Once a Year It will happen. It’s not rebalancing month. once a Year your portfolio. so skilled what does What does this mean? You have bought 30 stocks today. We will buy these 30 stocks again next year. We will review and see our new What is coming according to the list? So what Some of the old ones will come out and some will be new. Will come. Is it right? then a let’s look at the you No the factor we are looking at. so we have Multiple Factors Over Here Right Now We have just labeled it as factor one, factor Two, factor three. So assuming it is the Same Factors That We Saw Before Universe Plus Value Plus Quality Plus Momentum. That you know the question I was telling you of Portfolio size. How much maximum you Want companies? You can go down to five Companies. You can go up to 100 companies Also. But let’s assume you know you are A Balanced Investor and You Say I Want To have 30 companies only. So you know if you understand 50 companies also come according to your filter. Are. You will say I will only by the top 30. And now the next point is for you What weightage should be given? Let’s Take It At Equal weightage. So that means that 3.3% of you every I will invest money in the company. Now Another Thing That You Want to Look At Is the Momentum’s Lookback. So if you see that part like I did I was telling you that you are looking for your 12 month look. You can take back. You Can Take 8 9 10 It Works Well But Let’s Take 12 Months. Meaning if the price increased in the last 12 months Only if it is there then you should invest money in it. Exactly us And then there is the transaction cost. So every time I am entering and exiting There will be some transaction cost. So what is this 100 point? means why Are you putting it? Now for example your elder There is a portfolio. You have become a big man. Your Near You have ₹1 crore now. Ok? that you Will invest Rs 3040 lakh in each stock. According to your practitioners, you will have to pay ₹100 The price of one stock was to be received. But you Because if you have a big order then you will not get 100% Your order went to 101. So we have to assume some amount of Slippage. Because since we are a fund, so what? It happens that just imagine the fund size is ₹500 crore. Is. So when I hit the order, big big Quantity will be required. May be not one but even 2% There may be slippage. Get a rate of 102, not 100 Will go. So I will start moving the Price. So every time buying and selling I’m assuming a 1% cost. I will feel 1%. We’ve Seen Live I am not going above half right now. But basically this is meant for returns In this I think what I assume is that run When you do this you will get some percentage return This will adjust in it All this will be adjusted, so what have we done? Didn’t we create a small dashboard? got it And it is like a game so you play this game had been And you entered all these numbers, you entered these You made the dashboard and said that when I If I buy then this is our transaction cost will put Okay, so which stocks are coming now? There are in it Can you run the back test? Let’s go back now. If you run the test, then basically all these The companies will come again Yes, now I will tell you its complete end to end I will show you the result. Ok? Starting with What is the CAGR coming in at The Top? 28.87% I just have 10 year 29% what Is it correct? The draw down came to 67% meaning when If the market crashes, you lose 67%. in 20 There are 299 trades that mean that over a 10 year period on an average U boat 30 year after because we reviewed 30 stocks limit imposed That you won’t buy more than 30 stocks So how did 299 trades happen? So it is possible that someone may qualify in a year. No stocks were traded, meaning only 29 stocks In any year qualified Otherwise what does it mean to buy 299 times? Is there any selling? So what happens is that when we’re testing So today we have 30 stocks. At the end of the year, we sold those 30 stocks. Given. Then came back 30 new stocks. 30 stocks In reality what will happen to a more Complicated version of the back test which We do run, it will be 15 out of 30. Because we are coming back. So the number of Trades will reduce. got it? So basically every year because we Rebalancing. So every year that Changes will happen. What else are you doing? In this we are in every Years are rebalancing. Meaning, if someone stock It has tripled or doubled. we are speaking Yes, bring it back to equal weightage. good OK. So if I explain this easily then Is it like a Nifty index where Let’s say Cap means Reach Rebalancing And let’s increase someone’s market cap So that company came and its price reduced. So that company went away. Correct but going and coming based on our Filters. Exactly. So this is like a nifty basis your filter of quality, value, Momentum, everything. Correct. Absolutely done. It is correct. Now we will discuss its trades and its Let’s look at the data. This is his equity curve. Went. So a can we see now ₹1 lakh is How much has invested become? generally a if You Know the Rule If You Grow a Money at 26% It is 10x. Correct Yes So we should be more than 10x right now So ₹100 has ah so we had put about ₹1 Lakh, our starting point was 10 million Yes crore So is 1 crore basically ₹15 crore? Broadly Yes 15.5 We can go up and see that we have input What have you put in it? We had put an investment value of Rs 1 crore. What? Yes it is 1 crore. Not 1 lakh, ok. So 1 crore became 15 crore. It became 15 crores. If it was at 26% then it would have been 10%. It used to be crores. got it? So this would be what 3 to 34% Type. 29% 8.8 29% Got it. So consider that 1 crore becomes 15 crore. Is it right? But See This Is An Exit At A Peak Value. That’s what you assume. Right Butt Now it’s going at a 20% draw down so Understand that you would not have been 15 today. I used to have B12 Got it correct Right Now We Go Down to See the Drawdown Chart So See The Maximum Pain In 2020 This is where having a superior risk Management Framework Issuer In this we have taken the test that neither we All the money from start to finish is small cap I invested and never withdrew the money. We didn’t think that you know markets are Overvalued this is where on our and we What do we do? We use the VSI. Indicators and We Try to Move Funds When It’s Expensive We Will Move to Say Gold and Large Caps When It’s Cheaper Than We will come to small caps what I am Showingo You Over Here Is A Simple Model Where I’m saying I’m always exposed to small and mid caps between 500 to 20000 because regardless of where the Is it expensive or cheap in the market? I will be 100% exposed, just like the Index I’ll show you some more stats down What does it mean to know Win Rate? What is the win rate? For example, the win rate is 59.8 so around 60% Like I Told You You Don’t Need To be right 100% of the time. So if I am Buying 30 stocks on an average of about 18 to 20 Stocks Are in the Green. That’s my win rate. good OK. 60% of the time I’m in the green. So even if these 12 stocks made losses, they still You earned a 29% return on Absolutely Is. Oh nice. And This Is Stats for People Like Warren Buffett also. Ok. You will not get 80-90% of the money that someone Is there a win over a 10 year period for any fund? Manager ne see like for example warren Buffett holds about 10-15 stocks in 1000s portfolio recently he had mentioned that Over a lifetime he’s picked about to To 300 businesses and even more than that may be 400 businesses have lost income, so he is Not going to have a positive win rate for Sure he is not going to have like a 100% Win rate uske in his case also he will have Like a 60 70% win rate but the winners are Rewarding You So Well That You Don’t Have to Worry About the Losers Yeah. What is See the Beauty of the Market Is? The upside remains unlimited. and down side If I go, only what I have put in can go away. So You Know That Math Ends Up Working Out For you. Yeah. Ah we saw total number of trades. now these R The Returns by the Year. So for example, you know, we were talking about 2020 and 2021 were a very, very year of money printing. You know a great year to witness that. So it is Not in years like 2020 21 23 24 you don’t Need to be smart. You Just Need to Be Exposed and to be exposed need to know In which environment should I Exposure required and in which environment I Need to Play Safe That Is Extremely We Will Move Down to the Stock Portfolio Also you know then we look at the monthly Returns we look at another another osmotic To look at what rolling returns would have been Hai Bahut Bar Na Mutual Fund Ka Point Two The point return is 20% but the one He is an investor and he has very little left over. When I’m looking at a system I always Look at rolling returns because my The investor is not going to enter on day one And exit on day 100 he might enter at you No Day Two and Exit at Day Seven. So I came Have to look at an average all my Investors should be seeing good returns. It is possible an investor enters at the peak Values ​​and Enters at Bad Values. Butt Eye Need to make sure that my system is so Robust that I have created a system that Friend, he can enter or exit anytime There is expectation. So for example, let’s Look at three-year rolling returns mean an eye Will just take the cursor to there the three year Mean Rolling Return 23.9% Yes, it means any three year period in This 10 Year Cycle Starting in 2020 Exit in 2023 starting 2017 exiting 2020’s Bottom On An Average Over Different Three-Year Cycles Investors Have Got a 23% Return This Is Extremely Interesting to Look At At a rolling return, this is one level Into Quant Financials. I would say where You start judging the returns. Now I will The Top Winners from Shows You Like You Know We can go straight up to the top winners. So These are the top 30 winners of all time. Hmm for Example IOL Ah Ah Chemicals Has Been A Largest winner. We but a 661% return. I Can tell you when we but the stock and when We exited also. So if you see this stock Was boat in July of 2018 and we exited In 31 of July 2020 Now You Know See Like If You look at all the names for example Deepak Nitride Shch Technologies IFL Finance HLE Glass to Master bunch of businesses different sectors you know different numbers it’s not like i know the Management it’s not like you know I did something Did you know I have insider information? And I you know I have really created a valuation what it’s the part of the System. So for example, if you are at Tata Alexi It’s the long bar out there. So Tata What happened to Alexi? This has come twice Near us. So once it came First Time It Came From 2014 to 15 Second time it came from 20 to 202 So it is possible that we rebuy the stock. It’s possible that in the middle it does nudge make Sense and It’s Given Us Significant Return. in that period and it’s been a Great business. Now one of the things that is Extremely For Us Is What We Don’t Want To Do Predict Price. We got Price Predict Don’t do it. We are looking for Earnings Predict Have to do it. Because no ultimate earnings Will be chasing like price will chase Earnings. So what do we do? We are not For example, our CAGR is 28% of the system. We will see in the same period that All the businesses we have taken What happened to earnings growth? Actually EPS Growth. So now for example let’s look at Something like Tata Alexi Are we okay? And let’s look at iOL Tata Alexi see. Let’s go to Tata Alexi now In case you know our came in June 2014 And we sold it in June 15, which was in the middle There are bars that you can see that are actually Earnings Growth. So It Has Grown at 14% Then 17% then 7% and then 20%. So a large Part of the price rally has not come because Just Price Has Gone. It’s Because Earnings are low which is a great sign. Many times it may also happen that the price He ran away but Earnings did not run away. Which Happened in 2024 to Most Momentum Funds. As many momentum ETFs as there were, only one were working on the ratio that whatever part We will catch him. what’s in it It was found that the 2022 to 2024 momentum was very Big Rise. All the Stocks, Momentum ETF Edge A factor it did extremely well. But Ultimately it’s buying businesses. So the Stock Price Went Up But Those Businesses Earnings did not go up. Just PA Expanded Which is a bad side. You Don’t want to enter over here. When just PE Expansion is happening but earnings growth I am not coming. Ideal You Want Earnings Growth and you want price growth. One Study That We Did Was Nifty 50 Over 25 Years has done a 12% return and Nifty 50 EPS growth of the underlying businesses has Bean 12% Precisely. like there is like a 0.05 difference. So in the long run just like ROC Work Same Pay EPS Growth Will Work If You Can Create a Model That Can Predict Earnings and Is a Good Putting You are in a good position these businesses will show Earnings Growth You Want to Pick These Businesses Say You Want to Give More And more reliance on that model. We first Also see models where there is no return Good but actually earnings growth It is not coming. All those stocks are running away We are just not interested in something Like that. Because Stock Price Returns PE Expansion is not in your hands. PE Expansion is a factor of liquidity that How much liquidity is there in the market? It’s Possible that a stock which is going at 20 Times Earnings Go Up 70 Times Because Too There is liquidity. People are mad after the stock It became a fuzzy, but that is not in your Hands. When I get it, we are very Happy to Reap the Rewards But We Want To Be a part of a business which will show Earning Strategic Till. So This Is Broadley you super super fascinating. Very This was interesting. And you are saying that Your higher weightage on earnings growth Will remain. At all points of time we need these in the model It remains to be seen whether earnings growth is coming It is not coming in the underlying stocks. If earnings growth is not coming due There is a problem. Right and according to this model, so now you This is basically a model run since the last 12 years We don’t run this model. We Have a Better Version Of this. We do two-three things apart from this. We Apart from this, they also say that we are not Always exposed to small caps. we see Sometimes we have to take exposure and sometimes We don’t have to take it. This is just a part Off the model that we run. Obviously there are There are many factors involved in this. Its Afterwards we also have a clean up where If some businesses are not good enough in terms Of you know promoter holdings and references Check distributor check. So we that Businesses remove it. We try to keep it as objective as Possible. We don’t bring subjectivity into it. So our rule is no analyst in the office I can’t tell you after coming. I don’t like the stock It seems. He has to come up with a very objective framework in terms of numbers that these Why the stock should exit our model. Right? If objectively it can be removed Then we are very happy to remove it. If Objectively, you don’t have an answer, it just A Gut Feeling We’ll Keep Your Gut Feeling On The Side. Right? Very very interesting. so what The Highest Amount of Money You Made on Stock And Kitna X Hua Hoga and Which Company Was that? Ah so I think the fastest we made in One of our models was in Ah Vari. So Before Vari Energy Was Listed There Was Vari Renewable Deck and I Think Presplit it was at a I think 250 bucks And 300 bucks was entry press and then we excited about 23 2400 in that that was Like very short span like 7-8 months. Now if I had gone on a pure fundamental Basis based on a discounted cash flow Model Ah may be I wouldn’t have but the business. But It Was Only 3% of Our Portfolio and It became you know 30% of our portfolio. So That stock ended up doing extremely well. as a part ah another business that did Extremely well was Tata Alexi which you No in fact not in this model as a part Of our original model was a part of our Portfolio for About 45 Years. How much X did you make in that? So, that we entered at about ₹-800, and we Exit about ₹9,000. We Got Like Good Entry and exit that stock. But Again This is something that we don’t speak about like Don’t Look at the Stock Price Alone At you know what the return on that stock was Look at the Entire Process Or Right now as we have done the skillful thing we have done. Factorize Saw We Have Covered Everything What to Buy When to Buy How Much to Buy When to Sell That Makes a Complete Investor Profile I That’s How An Investing The journey gets completed not like yesterday I came to the investor and he was telling you You know I have this advisor and that What stock tips does the advisor give me? Yes and he tells me that this Buy stock and he or she caught this theme. So I just ask him if I might be that Guys is a good stock pickup but did tell you How much to buy? How will he tell? I said But it is he who has the conviction, not you. Should I take 10% of the portfolio or 5%? That is, 3% has to be taken. How Will You Determine which becomes a very large factor in your Investing Journey. you do you do you do you Know How Much Position Sizing Alone Can Change Your future. So what did you learn through Jim Simons? And you admire him a lot. He is the person Who made 66% CAGR CAGR and I think net of fees After it was some 39 40% CAGR so you What I’ve Learned Through Jim Symes What it is is something you admire about him. So Jim Siemens Is Like One of the Top Quant Investors Across the World Vary Few People Actually Know About Him. But in terms Of you know just to give value him. He was Valued at about $20-25 billion When he passed away. So is a significant Treatment. Isn’t that like the 100 crore book run? Had been. She Was Running a Very Large Book. His fund was called the Medin Fund. And Ah That fund was managing about $ billion Dollars. So, he had kept a cap that 10 Billion Dollars and Every Year They Were Generating 6- 77 billion dollars on that fund. And he I don’t think his first year was 2008 or nine were he was up 21%. oh my God. That was his first. First year, when he Was up 21%, that was his first year. One The book is called The Man Who Sold the market. And their returns were also written in it. Year after year, what have they done? Returns were given. And I think what Crazy is what he started at the age of 51 and Very inspiring 51 started or he Started Investing at Like Between 45 to 50 appeals then he was a math professor and You know he was not interested in finance And he started very late but you know 20 Years was good now so the thing with beauty. About Investing Is Like You Know You Can Start whenever you want and ah you know he didn’t have any maths skills the way he Developed everything was with the great he didn’t have any maths skills Have any ah stock that topic topic he had Only math as a skill. He was a math Professor. Sorry. And one thing that was Crazy About Him. What I Really Took Away From Him. Ah is that ah he said this is how Hee So Hee Was Ask, How Did You Build You No this 70% return. He saying I did even Build One Strategy Myself. Hee Saying, I’ve got a, you know, 100 to 200 really Smart People from Across the World. put Them in a room. give them all the best Infrastructure and Hardware. give them a Problems to Solve and Give Them a Partnership in the Business and See That You Will Get a great result which is what he Actually achieved. So he only hires like PhD in Astronomy PhD in Physics He does not hire people in finance. PhD in Astronomy Or like astronomy physics see he is Looking at people who are willing to solve a problem Problem. For example, in our firm today, Kushal there Are about 49 and 50 people out there majority 75% off Maybe I Would The People That We Have Are Non-finance background. And the reason is we Are only looking for problem solvers. Finance can be taut in 3 months. you know How difficult is the accounts module? Is. You can hire a tuition teacher. in 3 months You will learn the account. Right? So that is the only Finance That You Need. after that you need a Guy Who Is Willing to Solve a Problem and Who is hungry? So you know most of these Models are built by engineers and Not Build by Finance Graduates. because Finance can be easily taught to an engineer. We Feel It’s Hard to Teach an Engineer. It’s Hard to Teach a Finance Guy Engineering. We You can teach finance to an engineer, but you No, if you want to learn coding, it becomes little. Hard now because of Claude obviously it’s Easier But Idea As You Want The Problem Solve it, it doesn’t matter which one you are. He comes from a CA background, even if he is a CA. I have done CFA, I have done engineering You can learn all that in three months if you Are you really passionate about it? So Jims taught us this thing that like You Know If You Have the Right People on the Team And you know why I feel like an investor should be reliant on Rishabh alone ideally it Should be a collective skill and weather eye The process should exist or not exist. You Know Consently Evolve and the Return Should Continuum Hum That’s One More Rite Aid Thought Who You Mama or so app was you saw that picture 21 Here it’s basically like a that movie is About You Must Have Seen It Kevin Spacey Is The actor and which he is Yano Casino Wala Ya I Have Seen Counting Of Course That’s right, that maths professor is also one of his. There is a maths professor, he goes to that team Makes four people and then he farts And beats the dealer Black Jack. So a book Written by Ed Thop. This Movie Was Based On The book and the movie’s name was Beat the Dealer. And he did a card counting The mechanism was created which we can see in the picture. Let’s see. And where he actually is creates a Basically, in the casino everything is about Edge. What is your age? So, as many games as you You will play there, the edge is always in your favor Of the casino. Obviously the thinnest age that the Casino has in black jack. If you’ve ever been to a casino And if you play black jack you will see With Even Small Amounts of Money You Can Spend a lot of time out there on the table. Because the edge in the casino is in favor of the casino It is very thin. It’s Not Like You Know a Massive Age a were consistently in the casino will. Win. So you know you will win a game then the Casino. So what did he divide the Mathematical formula. to actually turn the Edge slightly in his favor. it is not Massive. But if you have a positive edge. so no If You Play This Game for Many Days, You Will Consistently beat the casino. So only created The System Then Actually What Happened Live In the movie that happened with Anthony he got Thrown out of the casino he got beaten up then I realized, friend, that I was playing the wrong game. Am. Let me get with the stock market and He said if I am so smart at con Finance Let Me Know You Use My Brain For That and Then He Has Like a 30 Track Record of doing 30% on Enam quantitatively before doing what he had Created a device so he was from MIT I think he was from MIT, but he had created a device which is sort of roulette table you know if you’ve ever seen the The ball spins on a wheel right so he Created a device that calculates where The ball will fall on the wheel. How accurate is the percentage? the same there was a there was accuracy that And obviously the accuracy was in the favor Of the prediction K B there was a 60% accuracy and a 50% accuracy and if you Use it consistently so you get to no end That device basically was working on the laws of Physics. At what speed does it come out? and he Had created the device in a very he actually That’s The Device in His Shoe. Oh wow. Go to the casino. And it wood work on some click mechanism. That the moment the ball was released. Hee Wood Click it and then the moment it would reach a Certain point to click against it wood Calculate the speed and then the velocity And then it would you know then he could Predict that yes because you know you can Continue batting even if the ball is rolling Little Bit then he would bet our after which he got And it was like it was an invention, it There in the When I Went to the US to That device was found in the Na Museum of MIT. Is So and he had nothing to do with finance. Guys are just problem solvers I have seen a problem that I have not seen yet There is a problem to solve So they came to the market with a very different View They Are Not Looking at the Stock Price. How do I get it for 100 now and how do I get it for 150 now? Take So the idea is that you know if you come to the Market with an attitude of problem Solving K Ultimately I Want to Biases Which Businesses to Buy. So I think success So what happened after that to me, so that roulette The machine he Or he created that and then again he got Thrown out. Good. I have just realized that my friend I play another game. and figure that The Stock Market Is a Much Better Place Because the See the age can be very easily in your favor. You Don’t Need to Be Like a Casino There End The Vols Can Be Crazy. and then you know Then there is the power of compounding, that’s 30 You did it for years. Because what is See in the Casino the House Once They start losing, ultimately they run out a money. And they realize that this guy is coming to win Used to be. They throw you out. You know I think Mathematics has a lot of importance to Play Investing Stock Markets. and the Those Maths and Physics are dedicated. from him Can also relate to a lot of things. Like I’m currently on Rhythm Desai’s podcast I did it. Joe from Morgan Stanley India is the MD of Morgan Stanley. He said that John Kelly had Was a mathematician. And he has this Kelly Criteria which a lot of investors Use. It is basically age upon odds. that your How many things in favor Divide by the odds. And then this percentage will be whatever ratio comes out. This Is the Conviction and The Percentage Weightage You apply to that investment. and a lot Of people unknowingly were using this call Criteria when they were investing in the Stock markets. Correct. So a lot of math physics Concepts Are There in Investing Age well. We don’t realize on a day to day basis But ultimately very interesting math Physics concepts are applied in Investing Stock Markets and All I Know Absolutely. Even Sanjay Bakshi I Remember Like back in 2016 when I read his Blog by a Fundu Professor Was. He had created an entire Probability Based Method to Decide Position Sizing. So he said this thing is a value Investor. Subjective Investor Butt He did the method that isn’t I am Investing in a Company with a Certain Amount of information so I bet Is. So say for example out of 10 we will Rate the information if I have two on 10 from I’ll put you no half ars of my book. Then you know I’m putting it based on some Thesis. So for example, a factory will be set up. Going to do. If the factory gets the loan on time I will add to the position size. If this event Happens then I add to my position size. And here actually devised a mechanism. So definitely what you are saying is right Dude there is a you know you can at least add some Amount of science to this game Ya super interesting buddy, what fun did you have today I learned a lot from talking to you Millie The Last Question That I Ask All My Guest It’s a Tricky One If You’re in the Shoes of Kushal Loda and and and and and and and And and and if you’re interviewing Mr. Rishabh Nahar What is one question you would Like to ask him towards the end so Tricky Question Kushal So But You Know If I who to ask you know may be not Rishabh but anyone From the industry that if an 18 years old, or a 17 year old, a 20 year old is Watching this, or if a 25-year-old is watching This, you know, ah, what should he be doing Today? If you know, he wants to be rich. So, What Should a 25-Year-Old Be Doing Today? If he wants to be rich. I think I need to start today. like you got To Start the Investing Journey ASAP. Like you know if you could start if you’re 15 You start when you are 15 You know before this we were speaking that I Told You Got Married at 25 Right I Think Too Things I Strongly Believe One Is Starting Your Investing Journey Vary Getting Married Early and Getting Married Really Early Is Great. I Think Why I’m Getting Married Early is great am i think there are like lots Things That You Learn on Your Journey to Marriage which you know i don’t think there is Advantage in postponing. Obviously you Have you got someone in your life? But Ah You No I I equated to like one of the most An important decision in your life will be Hu you Mary. Right? And the earlier you get On to that. The Earlier You End Up Adjusting. The Earlier You and Up Taking On More responsibility. I think so I have a Daughter Right Now and I Think After Having a Child After Having More Responsibility You End Up Getting a lot more hungry and you know I have Seen that with a lot of the investors’ chali Manga Head 12 Kids Warren Buffett Head a Three Kids Jim Simmens I Think Head About Three or Four Kids, one kid and all of these have like it. Not Like You Know You Know a Lot of Times People feel that okay I’m living in a metro And I need to I don’t think I can have Kids Because I Can I Need to Save Money But I think there is no correlation in that. Is. I think it’s the other way wrong mum you Get so ambitious that I have to do it. I want to build this may be the story in Your head it you want to build it for someone. Actually in the end you’re doing it for for for for for for yourself but there is Certain drive that comes with that. So starting early in both these faces, I Feel Like It’s Heavily Rewarded. Even the Investing Journey Because That Power Of compounding can be huge. The Fact That You Know Buffett Started 11 Is Like a Living Proof. Yeah. Not to say that you know, for example, Manges Started at 45 when he is get rich. Even Jim Simon started. Even Jim, he came and started at 50, but the Know the earlier the lesser the pressure your The compounding rate does not need to be 60% of the amount. In that 18% like we saw the math that 26% you Compound 10x and 10. 10 years, 10x, 10x, I mean 10x And 10 years and 20 years you have a 100. Which is what Ramdev Agarwal speaks About very often, right? You know, after he Spoke about it, we open up the Motilal oo o o o o o o Oswal & Balance Sheet. End We Were Seeing 2005 They Had 100 Crore Reserves Net Worth of the Business End in 2024 25 days ago 10000 crores actually Exactly did that on the business you know Weather It Was a Factor of Compounding Plus other business kiss but they ended up achieving that Yeah. So yah so starting arz I think Like probably the best thing you can do. So brilliant Billion Dollar Advice Guys. Start Early and Get Married Early If You I am not married yet. But thank you so much Rishabh For doing this. Trust me, I mean I mean This Completely When I Said This Was One of the most insightful podcasts and I mean Even Markets and Quant Framework Okay, but like Jim Symes’ stories plus. How in About Like Casinos and Rulers. Mathematics and Physics were hacked, how to use them? It happens. I learned a lot and this is Something Which I Am Going to Cherish and This Episode Is Something I’m Going to Keep And Cherish for the Rest of My Life. Thank you You are so much for doing this. I don’t say to all My guest. honestly you can watch my Podcast also. But this has been a very Very insightful and very intellectual Podcast. So thank you so much and wish you all The Best for Your Quant Investing. I I’m sure you’re going to be the Jim Symes of India and may be the first Rishabh Canal of India. So thank you so much and wish you all the Best. Thanks a lot Kushal. Thanks for having Me. Thank you. If you liked this video then I Request you to share it with all your Friends and subscribe to our channel so That we can give you more value additive Content in the Shortest Amount of Time. Tell us which kind of person you like. Need a guest. Tell us which ones I shouldn’t have asked questions. Who I should have asked more questions to So that you can get more value. and which ones There are parts that you absolutely love. Don’t come so that we can stream this part. In future episodes. so thank you so Much Once Again for Watching This Episode End Keep sharing all our episodes with your Friends and keep giving us feedback so that We Can Improve and Come Up With Better Quality content.