At 62% CAGR over 37 Years, Rakesh Jhunjhunwala Is One of the Most Successful Investors in the World Ever!
Rakesh Jhunjhunwala is known to have started his investing journey in 1985 with Rs5,000. Going by some reports, he was apparently worth Rs50,000 crore when he passed away two weeks ago. That is a compounded annual return (CAGR) of 65% over 37 years. Another report points to his wealth at Rs30,000 crore. Even that is a CAGR of 62%. 
 
No one seems to have calculated this number or explained its true implications. So here it is. Even a 62% CAGR makes Mr Jhunjhunwala the world’s second most successful investor ever, based on data available for investing marathoners. Nosing just ahead of him is Jim Simons of Renaissance Technologies, who racked up a 66% return between 1988 and 2018 (based on the last available data). 
 
The returns of legendary investors like George Soros, Stanley Druckenmiller, Warren Buffet and a few others are only in the high 20%. It is rare to find returns in the low 30%. Many ‘top investors’ barely managed a 20% ` compounded return. Yes, investing is that hard and Rakesh was that successful at it. 
 
In fact, Rakesh’s achievement is greater than that of Simons, a mathematical genius who has a team of super bright mathematicians and physicists to develop quantitative techniques and create algorithms to trade the market with high accuracy. 
 
In order to achieve his 66% returns, Simons employed hundreds of PhDs from diverse fields to detect patterns in what seem like random movements that we see in nature, life and markets. Also, most top investors earned their returns by investing other people’s money, using hedge funds as their vehicle.
 
Rakesh did neither. He worked with a small team of people for the past two decades and he did not get rich by managing money for others. He multiplied his own money. I have read about every famous trader/investor in the world and know no one who can make this claim. 
 
One other investor who did it all alone was Robert Wilson, who converted US$15,000, that his mother gave him in 1958, into US$800mn (million) by 2000, which is a compounded return of 30% per annum. 
 
Surely, Mr Jhunjhunwala’s long-term record of such extraordinary success is based (apart from luck) on a unique method of canny risk-taking, which got better and better over the years. Sadly, there is not much documentation of his strategies, his high and low points, handling of risk arising from high leverage that he embraced, and his nose for spotting a bargain when others around him were throwing in the towel. 
 
There are umpteen TV clips on his view about the market at different times, but there is no in-depth interview that captures his own investment journey in detail. 
 
Gregory Zuckerman has written a whole book on Jim Simons (The Man Who Solved The Market), even though Simons did not cooperate. 
 
Although few people are familiar with Robert Wilson, there is book on even him, titled Killing The Market by Roemer McPhee. 
 
There are countless books on Warren Buffett. 
 
Soros and his former partner Jim Rogers (who had an eye-popping record when they ran Quantum Fund between 1973-83) have written multiple books explaining their strategy. 
 
And there is the best-selling Market Wizards series of books on great traders and investors by Jack Schwager. 
 
But no life account of the world’s best investor and trader. This is unfortunate, because he was generous with his time with mainstream journalists. Of course, if you disagreed with him, you had to face a testy and scowling adversary who would fire back questions and counter-arguments at a high pitch.
 
Remember, there were many ups and downs behind Mr Jhunjhunwala’s 65% compounded return; he also survived three huge market crashes over three decades. He was only one of many speculators in Dalal Street in the early 1990s, when Harshad Mehta had already built much more wealth through a combination of trading, smart investing and deal-making with banks and public sector undertakings. 
 
In 1992, Mr Mehta was audaciously saying that his firm Growmore, would be bigger than Merrill Lynch in a few years. 
 
Mr Jhunjhunwala, having sold short, was nearly bankrupted by the Mr Mehta-engineered bull market. But Mr Mehta went up in flames largely because his own folly; Mr Jhunjhunwala survived. 
 
Here is the irony. Mr Mehta tried to make a ham-handed comeback, ramping up a set of shares, backed by a bunch of journalists, fixers and scammy businessmen. That too failed. 
 
A few years later, Ketan Parekh, the new big bull, followed Mr Mehta’s playbook but he too crashed. 
 
On the other hand, Mr Jhunjhunwla changed gears and strategy, and his wealth went up exponentially as he ploughed his trading profit into long-term holdings, aided by India’s rising prosperity and zero tax on long-term capital gains. 
 
I first met Mr Jhunjhunwala in 1996 in a tiny office near Dalal Street. He advised me to read books by Victor Sperandeo. His other advice was to always start with small positions because we are bound to make mistakes; and remain humble because the market can be merciless. Priceless words of wisdom! 
 
My next encounter with him was when India was in a recession in 2002. Like everyone else, I asked him: kya lagta hai? His answer was: teji, teji aur teji. 
 
A few months later, from April 2003, India had the biggest and longest bull market which lasted five years. 
 
Yet another time, we were in a hotel lobby when someone asked him, “Are you fully invested?” He quipped, “I am always 130% invested”; it showed the role that leverage played in his returns. 
 
He was a guest at the launch of Moneylife in 2006, his advice to me that day was “be positive.” 
 
The broad secret to Mr Jhunjhunwala’s success was that he combined two completely opposite strategies (short-term trading and long-term investing) spiced with borrowed cash. 
 
But how exactly could he dance to the short-term trend with leverage, and still remain firmly focused on the big picture, is a secret that has probably gone with him.
 
(This article first appeared in Business Standard newspaper)
Comments
atiksarkar10.blg
2 weeks ago
I respect RJ so much??…But his capital is 10 lakhs….In 10 years of his trading career he made more than 100% CAGR and made 200 cr ….Then he start investing and his CAGR 24-25%
vram2311
3 months ago
Some secrets are best left unsaid and undocumented
adityag
3 months ago
The best lesson I've learnt from Jhunjhunwala is this: health is wealth.

At the end of the day, your health is more important than your investment returns or size of bank account. A pity he couldn't do this. Needless to say, I'm in awe of what Mr Jhunjhunwala has achieved.
zenneosen
Replied to adityag comment 2 months ago
Life happens even to Billionaires. He didn't die at the age of 30 or 40 which I see happen to some of my colleagues who are in high stress jobs, he lived and died at the age of 62 which is fair enough for someone like him.
Free Helpline
Legal Credit
Feedback