-- Private equity and venture capital investor Prabhav Sharma highlights what he calls the “90/10 Rule of Investments,” a principle rooted in financial history and modern market data that demonstrates how a small number of outsized bets often drive the majority of long-term wealth creation.
Photo courtesy of Prabhav Sharma
Investment Philosophy Backed by Market Data
Sharma, who has led investments in the Middle East, India, the U.S., and Europe, highlights that the "90/10 Rule of Investments" is not just a personal philosophy but a mathematical reality. The principle is supported by extensive market research demonstrating concentrated wealth creation patterns across global markets.
Research from Hendrik Bessembinder at Arizona State University reveals that only 4% of U.S. stocks generated all net wealth created between 1926 and 2019, while the remaining 96% collectively underperformed Treasury bills.
The data extends beyond public markets into alternative investments. According to Bain & Company's 2024 Global Private Equity Report, just 15% of buyout deals in any vintage year typically account for over 80% of profits. Similarly, venture capital demonstrates this pattern, with roughly two-thirds of venture capital funds underperforming public markets while the top decile generates career-defining returns.
"Diversification protects you, but it rarely makes you truly wealthy," Sharma states. "In my experience, 90% of long-term returns come from 10%, sometimes fewer, of the bets you make."
Structural Forces Drive Concentrated Returns
Sharma identifies three fundamental factors that create the "90/10 Rule of Investments" phenomenon across modern markets. Power law economics governs investment returns, where statistical outliers drive the majority of value creation rather than standard distribution patterns.
The compounding effect amplifies performance gaps over time, transforming early conviction into generational wealth. At the same time, capital gravity creates self-reinforcing cycles where successful companies attract talent, partnerships, and additional capital, accelerating their dominance.
Sharma also references prominent investment success stories in the industry. Warren Buffett's Berkshire Hathaway derives more than 70% of its value from just five companies, demonstrating concentrated rather than diversified investment strategies. Sequoia Capital's legacy stems from a handful of transformative investments, including Apple, Google, WhatsApp, and Stripe, despite backing hundreds of startups throughout its history.
Sharma adds, "Sequoia backed hundreds of startups, but the billions came from a handful of companies that changed global technology.”
Lessons for Today’s Market
Sharma believes the “90/10 Rule of Investments” is both a warning and an opportunity for intelligent capital allocation. His approach balances the reality of concentrated returns with the practical need for risk management in professional investing.
The veteran investor advocates for "smart concentration" rather than traditional diversification approaches. In boardrooms, he often reminds younger investors that wealth creation is rarely linear. His investment framework emphasizes conviction in identifying transformative opportunities that usually appear risky or contrarian when they emerge. He also emphasizes patience, as most investors undermine success by selling winners prematurely to secure gains.
“You’ll look at 100 deals, close five, and one or two will define your career,” Sharma says. “The job isn’t to chase everything. It’s to recognize the outliers when they appear and back them with conviction. Investors who embrace the 90/10 Rule of Investments will shape the next generation of wealth creation.”
Sharma’s perspective is shaped by his direct experience navigating global markets and structuring investments for sovereign wealth funds and private institutions. He emphasizes that the principle challenges traditional approaches to diversification and reflects the accelerating dynamics of modern economies.
“Greatness is rare,” Sharma mentions, “but when you find it, it’s transformative. Investors who embrace the ‘90/10 Rule of Investments’ will shape the next wealth generation.”
Contact Info:
Name: Prabhav Sharma
Email: Send Email
Organization: AlphaX Holding
Website: http://www.prabhavsharma.com
Release ID: 89170447
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