What is the investment mantra from Zerodha CEO and founder, Nithin Kamath? In an exclusive interview with FinancialExpress.com, he shares his message for new investors, the common mistakes and the asset classes he favours.
Here is the full transcript of the exclusive interview-
Zerodha perhaps attracted the largest chunk of first time investors post the pandemic. From what you have seen, what are the biggest mistakes new investors made?
It’s all the same mistakes that most investors make, like overtrading, investing in penny stocks, lack of diversification, and being too short-term oriented.
Post the market sell-off, how has the behaviour of these new investors changed? How does it compare/contrast with the more experienced investors?
Again, all investors are more alike regardless of their age. Whenever new investors see their correction, many tend to stop trading and investing and leave the markets altogether. This is because they learn the hard way that making money is not easy. In a way it’s a good thing because when you are young, you tend to have less money, and you are better off making mistakes and learning with less to lose.
What’s your message for retail investors who continue to push the idea of getting rich via the F&O route?
I’ve said it earlier, “The stock market is the toughest place to make easy money.” Not all people are cut out for trading and they are better off investing in index funds and instead focussing on improving their careers.
Zerodha also has a related business that facilitates investments in mutual funds. How’s that been tracking? In particular with regards to new SIP set ups, and more importantly, cancellations?
The trends mirror that of the industry. We haven’t seen any dramatic slowdown in the flows or SIPs yet. What happens next on what the markets do. If the markets continue their downward journey, then we’ll see a slowdown for sure.
Now that you have shared what your customers are doing, could Nithin Kamath share with us how he thinks about money, and which asset classes he tends to favour?
Money gives me the freedom and the risk taking ability to support the new ideas we feel excited about in the long run. As far as our personal investments are concerned, all is managed by my younger brother Nikhil.
What are the personal lessons you have learnt in your own journey as an investor?
Perhaps the biggest lesson is to experiment, figure out what works for you and stick with it.
You are a founder of Rainmatter Foundation, an NGO driven to work towards climate change and conservation. Please share your thoughts on the subject, and the progress you have made so far. What are your long term goals?
Rainmatter Foundation is a team we have built to give back to the community around us. We have decided to focus on Climate Change as a focus area, and this includes finer verticals like rural livelihoods, agriculture and soil quality, energy, materials, waste management, water management, capacity building at all levels of our country among others. Today we have a phenomenal team that has built out partnerships with several non-profit organizations to create a common chase of trying to create impact and long lasting change.
You are a fitness enthusiast and you follow your own protocol for health. Please share with us a few tips that you believe could in general be good for our readers. Also, in the same context, what’s your take on people refusing to buy health insurance?
I think for health, there isn’t one size fits all. I would suggest everyone to find out what works for them. But at the bare minimum, try to be active, play a sport, eat well, and try to get good sleep. Beyond this everything else is a bonus.
Like I have said in the past, insurance is the biggest aspect of personal finance that the vast majority of Indians struggle to understand. The major big reason behind this is a lack of awareness about insurance along with rampant mis-selling complexity, spam, etc. Health insurance and life insurance (term insurance) are the only two products most people need but the products that are sold are ULIPs and other traditional products that promise both insurance and investments but offer the worst of both worlds.