Summary of this article
Discipline beats prediction in volatile markets.
Algorithm-driven investing reduces emotional bias.
Risk-adjusted returns drive long-term compounding.
Portfolio resilience is once again in sharp focus, which can be attributed to rising macroeconomic uncertainty, increasing volatility, and shifting global capital flows. In such an environment, the real factor that differentiates for investors is not prediction but rather discipline and structure. This theme is central to Flameback Capital’s systematic investing approach, which was discussed at the Outlook Money 40After40 event as a workshop.
The traditional ways of picking stocks to invest in are constantly challenged by market competition and efficiency. With the information spreading instantly over listed stocks, which generate consistent returns, it is becoming extremely difficult. Emotional decision-making has cost the investors significantly, with the investor confidence eroding over time and an aversion to risks due to losses.
The data shared by Flameback Capital is humbling. According to Sebi studies, 91 per cent of F&O traders have lost money during the financial year 2024-25. The data shows that Indian retail investors have collectively lost over Rs 1.05 lakh crore in this trading segment. Where the Indian household allocation to equities stands at a humble number of 8 per cent. This number is far less than the global average of 35 per cent. With 45 per cent parked in fixed deposits that often fail to beat inflation in the long run. This gap reflects not just the risk aversion that is present in the investors' minds but also how inefficient capital allocation is driven by fear, misinformation and short-term thinking.
The alternative discussed lies in systematic, algorithm-driven investing. Unlike discretionary investing, frameworks that operate on predefined rules, disciplined rebalancing, and structured risk management are preferred. By removing the emotional interface and ensuring consistent and timely execution across markets.
Flameback Capital shared its philosophy that reinterprets the classic “Tortoise and the Hare” tale. Having a success story in markets is not reliant on being steady and slow entirely, nor is it dependent on fast and aggressive tactics. It is about creating a rhythm between the two as per one's own judgment and analysis. Quant technology enables rapid signal-based decision-making.
The post-quant era in Indian markets has shown improvements: an average return of 2.6 per cent, which is a reduction in drawdowns, and a 2.3 times improvement in Sharpe ratios. This is an improvement from the pre-quant era. Even a modest 2.6 per cent incremental annual return can generate extraordinary wealth through compounding, over multiple decades.
Speaking on equity, the data shared how it has outperformed most asset classes across long-term investing horizons. The Sensex delivered a strong CAGR performance over the decades. However, the key is not blind exposure but rather a structured allocation that is diversified across ETFs, as per investor's risk profile.
Sustainable wealth creation requires one to align the financial objectives with time, managing multiple risk factors, all while focusing on risk-adjusted returns rather than headline performance. The moral was simple: emotions destroy wealth, discipline compounds it.
