Forget DPI or IRR—Here’s What Really Matters

We live in a world obsessed with binaries, where we’re often made to pick sides. We love to pit two forces against each other as if there can only be one winner. It’s either this or that, good vs. evil, right vs. wrong. The debate feels like a relentless tug-of-war.

In a world that glorifies extremes, we often overlook the truth: most metrics in life, business, and investing aren’t enemies; they’re dance partners. What appears contradictory at first glance often works better in tandem. Understanding this harmony doesn’t just make for smarter living; it makes for smarter investing too.

Let’s unpack this, shall we?

Being a private market newsletter bullish on the practice of investing, let’s address the core binary right off the bat: Risk vs. Reward. We love to think these two are at odds with each other like you can’t chase one without compromising the other. But in reality, risk and reward are intrinsically linked. No risk, no reward. Too much risk and you lose everything. The goal isn’t to minimize risk but to optimize it. Every savvy investor knows that taking calculated risks—those that balance downside protection with upside potential—is the name of the game.

You’d think binaries are exclusive to investments, but this habit of choosing a side has paved its way in all areas of life. Dieters love to obsess over one thing: calorie count. The logic? Fewer calories, better life. Wrong. You could eat 1,500 calories of potato chips or lean proteins — but only one fuels long-term health. Calories give you quantity, nutrition gives you quality. Ditching one for the other? Like driving with three tyres — works for a bit, but you’ll wreck the whole thing eventually.

And while we’re at it, let’s talk about BMI vs. VO2 max. BMI gives you a basic number, but it doesn’t paint the whole picture. VO2 max, on the other hand, tells you how well your body uses oxygen—critical for endurance and overall fitness. One is just a snapshot, the other is an X-ray. Focusing on BMI without understanding VO2 max is like measuring success by calories alone—short-sighted and incomplete.

Same with cost vs. benefit; It’s easy to think lower cost means higher profit, but short-term savings often lead to long-term regrets. That slightly pricier laptop? Lasts years longer. Skimping on quality simply costs you more in the long run.

Then there’s growth vs. stability: people think you have to choose. No. Growth without stability is like building a skyscraper on quicksand. Innovation thrives on a solid foundation. And while we are at it, let’s nip the “routine equals productivity” myth in the bud, please? Routines are all hunky-dory until life throws you a curveball. Flexibility without discipline leads to chaos, and discipline without flexibility? You’ll stagnate. The most productive people know that success comes from mastering both. Flexibility is your safety net, discipline is your ladder.

In life, business, and investing, it’s never about one metric. It’s about balance.

The people and companies who win? They’ve stopped choosing sides and started mastering the art of “both.”

The same principle applies across asset classes, and in no place is this more evident than in the worlds of listed and unlisted Indian markets.

Metrics Complement, Not Compete

In Indian public markets, investors love to play metrics off each other. Valuation vs. profitability. Growth stocks vs. dividend stocks. Liquidity vs. long-term value. Here’s the problem: this mindset puts artificial barriers where there should be none. Valuation isn’t at odds with profitability, just as liquidity doesn’t have to fight long-term value.

A classic example? Many Indian investors lean heavily on the price-to-earnings ratio (P/E) as a standalone metric. But P/E, in isolation, is like judging a person’s intelligence by their SAT score. Useful? Sure. Complete? Not at all. To get a fuller picture, you need to balance it with other metrics—like Return on Equity (ROE) and Debt-to-Equity Ratio (D/E). The smart play is combining these metrics for a healthier portfolio, rather than focusing on one while dismissing the other.

DPI vs. IRR: The Tug-of-War That Shouldn’t Be

Switch gears to private markets, and you’ll find a different pair of metrics at odds—DPI (Distribution to Paid-In Capital) vs. IRR (Internal Rate of Return). Ask ten people which is the better measure of success, and you’ll get ten different answers. Spoiler alert: both metrics are necessary.

DPI tells us how much actual cash has been returned to investors. It’s simple. Tangible. A number you can relate directly with respect to your investments. Investors love it because it’s real, unlike those theoretical paper gains.

But DPI doesn’t tell the whole story. Enter IRR—the rate at which investments grow over time, reflecting the impact of compounding returns. IRR is more time-sensitive, capturing not just what you’ve earned, but at what pace you’re earning it. If DPI tells you how much cash you’ve gotten back, IRR tells you how efficiently your capital has been growing along the way.

The eternal debate comes down to this: should investors focus on what they’ve already received (DPI), or how optimally their investments are growing (IRR)? The truth is you can’t make a smart decision without both. A fund that looks great on DPI but has a low IRR might not be as healthy as it seems. Conversely, a high IRR with poor DPI suggests paper returns that haven’t materialized into real cash yet.

In bullish markets, GPs tend to hold onto investments too long, watching IRR balloon while DPI lags. Greed kicks in. In bearish markets, fear pushes GPs to exit early, reducing IRR but locking in decent DPI. Smart investors and fund managers know when to play both metrics off each other to win.

Public vs. Private Markets: A Portfolio Power Couple

And, and, and…

If you thought DPI vs. IRR was complicated, welcome to the broader battle: Public Markets vs. Private Markets. The debate is everywhere— in exclusive HNI groups, at family office conventions, among advisors at cocktail parties—everyone wants to know which is better for your portfolio. The truth? You need both. They’re not competitors; they’re complementary sides of the same wealth-building coin.

Public markets give you liquidity, transparency, and the ability to shift quickly. Stocks can be bought and sold at a moment’s notice. It’s your safety net, providing immediate access to cash, crucial for flexibility in fast-moving markets. But this isn’t the whole picture.

Private markets? They’re your long game. They offer higher potential returns, exclusive investment opportunities, and the freedom to ride out market cycles without the volatility that rattles public markets. Private markets allow for patience, letting companies mature and compound value, far from the public eye. They’re not bound to quarterly earnings or stockholder panic, giving them space to grow big returns over time.

In India, these two asset classes are often treated like rivals fighting for a spot in your portfolio. Wrong move. The smart money doesn’t pick sides—it builds a portfolio that uses both. Public markets are your liquid foundation, private markets are your growth engine. When combined, they create a robust strategy that can weather slumps on both sides of the coin.

Moral of the Story? Balance Beats Extremes Every Time

Whether it’s calories and nutrition, cost and benefit, or DPI and IRR, life and investing aren’t about picking one metric over another. Balance is the secret weapon. In public markets, private markets, and every aspect of your portfolio, the right combination of opposites isn’t a contradiction. It’s the smartest move you can make.

Stop thinking in either/or. Start thinking in both/and.

The greatest wins come from balance, not extremes.

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