Mutual fund
A video on how sheep farming beats mutual funds on X got me all excited this morning. I promptly forwarded it to a few friends. Then I thought, why not go a step further — find some smart sheep farmers or maybe even buy out a sheep farm myself (surely they’d be small and affordable, right?). After all, if startups can mint unicorns, why can’t I start with a couple of sheep? A video (shared below) posted on X shows a man explaining how he earned better returns from sheep farming than from mutual funds.
Man invested same amount in both Mutual fund and sheep farming
After 3yrs, returns on Sheep is 10 times while Mutual Fund isn’t even doubled
Truth that Mutual fund guys and Finance influencers don’t want you to know pic.twitter.com/PpcJACZei6
— EngiNerd. (@mainbhiengineer) November 6, 2025
On paper, the sheep story looked perfect:
- Low start-up capital: Instantly productive, self-sustaining, and gloriously VC-free.
- Magic of compounding: Each sheep reproduces. Finally, an investment that grows while it sleeps — and eats.
- Low reinvestment needs: Just some feed, land you already have, and a prayer.
- Guaranteed demand: Meat, milk, wool. Call it the holy trinity of inflation-beating returns.
It sounded like a living, breathing version of a high-IRR asset — self-replicating, cash-yielding, and scaling biologically, not linearly.
Then reality bleated back. Turns out, the only thing multiplying faster than sheep were my assumptions.
An ex-colleague recently described me perfectly: “You get impressed by ideas that aren’t told as stories.” Ouch, but true. Recency bias came to my rescue this time, and I paused before buying a flock. That’s when the shiny narrative started to shed its wool.
- The ovarian lottery: What if the first two sheep produce two males? Business over. Start over. This can happen every single time — a neat 50% probability of pain.
- The hidden costs: Labour to tend and maintain the herd (the wife and kids can only help so much), land rentals, feed cost volatility, vaccines — all conveniently missing from the viral video. As the flock grows, costs rise instead of falling. Economies turn into diseconomies before you can say “baa.” Put differently, the character of business and its returns profile will transform radically when it scale.
That’s when I was reminded of Michael Mauboussin’s “Measuring the Moat,” which I’d read years ago. I can’t recall every line, but the core argument I remember: a fantastic street vendor may earn sky-high returns but can never scale — he’ll never build a moat or hit the tipping point.
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Street vendors (and, yes, sheep farmers) are stuck in perfectly competitive markets. Anyone can start selling the same product with minimal capital. Your favourite golgappa wala or nukkad chaiwala may be brilliant, but if he hikes prices by Rs 2, you’ll cross the road to his rival. Raise it by Rs 5, and he’s history.
Even if one innovates — better cart, tastier chai — others copy instantly. No barriers, no pricing power, no moat. As Mauboussin puts it, some businesses simply never reach the tipping point where growth attracts returns and keeps competitors out.
So yes — a street vendor can’t leap from good product to economic moat, and a sheep farmer can’t jump from good business to scalable business. Both stay trapped in markets where effort and skill don’t translate into durable returns of the same magnitude – not even close. There are several industrial size sheep farms in Australia and New Zealand but they do not earn extra-ordinary returns either.
The closest example here in India may be Venkys (India) which is engaged in poultry breeding and chicken meat processing. It made an average return on equity of 13% over the past 10 years, -2% in the Covid year and 36% in the best year (2018). Mutual funds promises better returns, because Venky’s today trades at over 1.3x book.
So, for the sheep farmer or the street vendor, their micro-business might beat a Chhota SIP — but only up to a point. Sheep farming is great for the farmer, not instead of the SIP.
Because that same Chhota SIP helps him diversify, de-risk, and quietly participate in hundreds of moats he could never build himself.
Moral of the story: Mutual fund sahi hai. They don’t need vaccines, grass, or for that matter, gender balance.
And speaking of sheep, the stock market has its own flock. They arrive in bull runs, full of optimism… only to get sheared. Or worse, slaughtered.
So, there’s a reason they call it a bull market — the sheep rarely make it out alive.