New Book Alert: The Long Game is AvailableMy new book, The Long Game, is available now. The book contains reflections from 30 investors who’ve survived decades of market cycles. You’ll learn how to tune out the noise that makes you second-guess yourself, handle the fear and greed that hurt your decisions, and stick to principles that actually compound wealth over time. Click here to get your copy.Click Here to Order NowPrashant Jain retired from HDFC Mutual Fund in August 2022, after nearly 30 years of managing some of India’s largest equity funds.When he left, he wrote a farewell note called Saar, which means ‘essence’. It was a detailed log of the most important lessons he had learned in his long career as one of India’s best public money managers. I have linked it at the end of this article.Among all the lessons he shared, one of the most insightful came from a table buried inside the note, which was like a full scorecard of his career.Here is that table.So, over roughly 19 years, his funds invested in 465 stocks. Of those, about 76% made money, 24% lost money, 5% were big winners, and just 1% were what you’d call disasters. And then, just 55 of those 465 stocks generated 85% of the total wealth created.He then wrote:If only one had the wisdom to avoid 90% of the investments and instead invested more in the 55 stocks.A man with a 30-year track record, looking back, saying most of it was noise. I think he was just being honest, which is rarer than it sounds.Now, what does a scorecard like that tell us? I want to cover three ideas, which I think aren’t investment techniques but ways of being as an investor that make long-term survival possible. Because ‘survival’ is really what I want to get at. Staying in the game long enough for investing to actually work.Idea #1: Build a Permanent No-ListThere are businesses you should probably never own. And the reason has nothing to do with price.Most of us carry around a mental model, without even realising it, that any business is worth considering if the price is right. If it falls enough, and if the valuation looks cheap enough, eventually everything becomes an investment candidate.But that is not quite true.There is a category of business where the structure itself is the problem. These are businesses where capital goes in and doesn’t come back out, largely because of how the business fundamentally works.Telecom in India is the clearest example I can think of. At various points over the last two decades, telecom stocks looked statistically attractive. The sector was growing and valuations kept falling. And investors kept returning because it kept looking cheaper. But no price could fix what was structurally wrong. The capital requirements were enormous, and pricing power was essentially zero. Everyone was offering the same service. And the race to the bottom eventually became total.Now, the lesson here isn’t to “avoid telecom.” The lesson is to ask, before you ever look at a valuation: Is this a business where capital can survive? Where good management can actually make a difference? Where the economics allow a healthy business to stay healthy?If the answer is no, move on, for your own good.Prashant Jain was quite explicit about this. He listed sectors he had (almost) never invested in, which included infrastructure, power, real estate, telecom, media, and certain NBFCs. And he said most of these were avoided “irrespective of price.” Now, that is a different kind of discipline than valuation discipline. It is almost a moral stance on what kind of business deserves your capital.Building that list slowly, over time, is I believe one of the more powerful things you can do as an investor. It’s like an ‘anti-watchlist’ of businesses you won’t touch at any price, because you’ve thought them through clearly and you know what they are.Idea #2: Know the Difference Between Understanding and OpinionHere is a pattern I’ve seen many times. Someone buys a stock they believe in. It goes down. The story turns bad. And then, often right before the recovery, they sell, at a loss, because the conviction they thought they had wasn’t as strong as it felt when they were buying.This happens because most of what we call ‘conviction’ is borrowed. We hear a smart (even ‘smart sounding’ is enough) person make a compelling case, see some data points that fit together neatly, and we mistake that feeling of agreement for understanding.Now, borrowed opinion does not work in your favour when the market moves against you. It disappears. And then you sell.On the other hand, understanding the business really is different, and difficult. It comes from studying the business itself and not the stories around it, and working through how it actually makes money, where it could break, and what it may look like in five or ten years. That kind of understanding can hold through difficulty because it was never dependent on what ‘other people’ were saying in the first place. It’s based on your own independent study and judgment which, I believe, if you cannot do, you should never pick direct stocks.Let me bring in some philosophy here. J. Krishnamurti, philosopher and one of India’s most revered teachers, spent most of his life pointing at this distinction. While he wasn’t talking about investing, he kept asking: Is what you call knowledge actually yours? Or is it just layers of borrowed thought that you’ve accumulated and mistaken for understanding?In investing, this is the difference between holding through a bad year with some equanimity versus holding through it while praying it recovers and waiting for someone to tell you it’s going to be okay.Both look the same from the outside. But they feel completely different from the inside. And they lead to very different decisions when the pressure really comes.So, before you buy any stock, ask yourself: Could I explain, in my own words, why this business will be healthy ten years from now?If you can’t, what you have is an opinion. And opinions generally won’t protect you in a bad market.Idea #3: Surviving is the FoundationPrashant Jain’s scorecard I shared above, where 55 stocks generated 85% of his returns, is easy to see as a diversification lesson. You need many attempts because you can’t know in advance which will work. Maybe. But there is something else in it too.Most investors, even careful and patient ones, churn their portfolios too much. The stock position goes up 40% and they sell because it feels responsible. It drops 15% and they get nervous. The story changes a bit, and they find something more exciting. They never actually let compounding happen.Charlie Munger said:The big money is not in the buying and the selling. It is in the waiting.But real waiting, which holds through years of underperformance, or sideways movement, or everyone around you saying you’re wrong, requires the first two ideas to already be in place.It requires that permanent no-list. Because if your portfolio contains businesses that could permanently destroy capital, waiting is dangerous. That list tells you which situations deserve patience and which deserve exit.It also requires genuine understanding. Because time erodes borrowed opinion. Every month that passes without visible progress, and every smart person who says you made a mistake, these things eat away at borrowed opinion until nothing is left. However, real understanding doesn’t erode the same way. In fact, it actually deepens.I think about the Bhagavad Gita when I think about this. Krishna’s instruction to Arjuna of doing the work but without attachment to the outcome, is often read as spiritual detachment. I think it is more practical than that. It is saying that if you are constantly watching the scoreboard, you will start making decisions based on what you want the number to be, rather than what the situation actually requires.In investing, that attachment appears as selling winners too early, holding losers too long, and buying into whatever is working right now. The cure is to do the work deeply enough that you have a reason—your own reason— to stay with what you own even when it is uncomfortable.Prashant Jain’s 30-year scorecard is not really a story about a fund manager. It is a story about what separates investors who survive from those who don’t.And if you’ve been a reader of Safal Niveshak for some time, you already know that it is not intelligence, or access to better information, or even picking the right stocks. It is the slow, daily work of knowing what you own, knowing what you won’t touch, and having the patience to let time do what time does best.That work never really ends. But it compounds, just like good investments do.Prashant Jain’s farewell note, Saar, is available here. I recommend reading it in full.If you enjoyed this piece, you may also like The Long Game, a book I recently published featuring lessons from 30 investing practitioners on patience, survival, and building wealth over time. You can find it here.Click Here to Order NowThe post On Surviving: Three Ideas From 30 Years of Investing appeared first on Safal Niveshak.