Zerodha co-founder’s advice to investors: Wait, don’t buy this fall

“Markets have not corrected that much, they have gone up 100% and are down 12-13%. But in terms of volatility, whenever you see a 10-12% correction, they tend to correct a bit more. So, I would not say that this is a good time to buy. Every hour many news are coming out about this. geopolitical tension which is happening. So, I think people should wait, see what happens with inflation and see what happens to the geopolitics of all this. I don’t think now is the right time to ‘buy the dip’.” livemint,

‘Market still expensive’

If you compare today’s multiples with any time in our past, even at 16,300, the markets are expensive. Hence, it is very difficult for him to assess the risk to reward ratio. I would say the risk to reward ratio is in your favor when the markets are in, you know, 15 PE or 16 PE or something like that, which is not the case right now. Correct? So, I’d say the markets are still expensive, and it’s probably not the time to equate the risk-reward ratio with how much valuations are worth.

“I think the volatility will continue for a while because I don’t think the Russia-Ukraine issue is going to end anytime soon, at least not in the next one or two months. In our budget in February, we talked about crude oil prices. Was accounted for around $70-$75 a barrel. It’s 110 today, and it looks like it could go up to 130-140. If that happens, our fiscal deficit numbers are completely skewed Presumably, the currency will depreciate a bit based on that number but I wouldn’t be surprised if we see a range-bound slightly negative market over the next six to 12 months,” Kamath said.

Gold vs Crypto?

I like that gold as a commodity generally does well in times of high inflation. Other commodities, which are more associated with manufacturing, you know, like steel and iron ore, and copper, zinc, aluminum, among others. If interest rates go up, there will probably be a decrease in demand over time, and that might correct them, but I don’t think that will happen this year, but maybe next year.

Cryptos is also so gray in terms of regulation, and the impact cost is so high that buying a huge chunk of crypto each time has to be done. I don’t think the crypto markets are anywhere close to the level where people can really consider it a hedge against inflation and invest just because it is so liquid as a market. If you ask me which crypto coin out of all the options you have today, which crypto coin will be 2030 years down the line? I do not know.

As energy becomes more expensive, I think it will be harder for people to transact in cryptos like bitcoin, ether. I think something new will come along that will be a little more relevant and easier to use inefficient energy than it is today. But I don’t think I’ll be putting any of my money in bitcoin or anything equivalent thinking it’s a hedge like I can with gold for a 10-20 year outlook.

View Equity Mutual Funds

One should look at the expense ratio and funds which are cheap. ETFs are a great idea because they have a really low cost of management. I would suggest to stay away from mid-caps and small caps because when the interest rate cycle goes up, if some companies have to fail, then these companies will fail first, then the big companies, which have huge gaps and cash reserves etc. Huh. Investors should stick to large-cap, blue chips and watch the expense ratio closely and don’t overpay.

stock selection strategy

“Asset allocation is important. Not more than 30-40 per cent of savings should be invested in equities. Do not get involved in any leveraged products, as the market is volatile and leveraged products will kill you when these volatility increase. So, focus on large-caps, focus on expense ratio, keep no more than 30 to 40% in equities, and get as much diversification as possible,” he advised.