Zerodha founder Nitin Kamath’s long term stock picks advice

The country’s top online brokerage firm Zerodha has become the investment platform for retail investors with over 8 million users. in exclusive conversation with livemintNitin Kamath, its founder and CEO, shares his thoughts on investors’ attitudes about stock selection, diversifying portfolios while avoiding common mistakes and biases, his company’s plans for the future and more.

Value vs Growth Investing

Investing in capital markets has evolved because of the ease of access to information. The price of any possible future outcome is already in the stock. However, finding truly value stocks is a difficult question.

The essence of investing is not really value or growth, it is about portfolio diversification and ensuring that there is not too much exposure to a stock or sector or even a country. The idea is to diversify it enough and especially for retail investors not to try to time the investment by doing everything at a time, but to invest overtime so that you get a decent dollar average cost.

stock selection

Today value is really based on growth companies and everyone’s investment in how the company can grow. And the strategy of choosing growth companies is a high risk strategy and investors should be aware and aware of the risk and diversify efficiently. Investors should look at stocks of companies that are performing well whose prices are better in today’s world.

If I pick two big mistakes that investors make – one is focusing in 1 or 2 stocks and the other is to short it, short it, and that’s the downside for most retail investors who come here. Market. They eventually fall in love with certain stocks and as the stock goes down, their confidence in the stock to bounce back increases and they buy more of it and eventually they reach the point where they can buy 2 or more stocks. 3 stocks become like this. A great concentration on their portfolio.

It is especially hard for retail investors to sit on their investments, so the portfolio approach to investing is the right way to go about it, which is easier said than done because it also depends on the amount of investment. The problem with this approach is that the foundations and principles on which one begins to invest are poor. In the long run, the most likely way to make money in the market comes from taking a portfolio approach.

Although it’s a difficult problem to solve because human bias tends to make you do certain things in certain ways, the easiest time to learn all of this is when you’re just starting out because those certain investment habits will change in the future. It becomes difficult to change, you grow.

A cheap stock doesn’t necessarily mean it’s attractive to buy, which has become a common retail investor strategy because they expect it to bounce back, which is a worse strategy. In the stock markets, if the value of a stock is going down and falls significantly it means that there is some bad news around the hall.

At Zerodha, we are trying to prevent people from making such mistakes because the less mistakes investors make, the longer they will survive in the market. People are attracted to undervalued or penny stocks, especially first-timers, and the convenience of nudges alerts people which has helped us as our penny stock trading volume has decreased by almost 75% And it has created a huge impact.

Asset classes that will grow in the next few years

This is for each asset class, wherever the higher the return, the greater the interest generated. Crypto has also done so well with all its regulatory grain because it has made money for people, so people are interested in it. The markets have performed really well over the past 2 years, as stock participation has increased. They are outperforming real estate, fixed deposits and others.

As long as the stock market can do this, people will be more interested in it than in fixed deposits or others. Personally, I don’t think there is money to be made in real estate. It is at the bottom of the list. There is uncertainty about gold in the world. (AUM) in terms of crypto talk. While you may have a 10 million investment or maybe 1 in 5 as they claim, don’t think the investment amount is more than $2-3 billion, given the size of the Indian capital market, India. Nothing in view of the size of the gold market. ,

Crypto is a wildcard here, depending on how the return is, it could be anywhere. I believe that activity in crypto will be low and not high because governments will have to jump in and regulate it in some form or the other. Gold above FD. If India is to perform well in the next 20 years, equities will be the best performing asset in the category. Corporate governance in India historically was a problem, which has improved over the years. If corporate governance increases, the chances of equities to perform well also increase.

IPO market in 2022

I don’t think the IPO market will be that hot this year, which I think is good for the masses. If the market is too hot, everyone is trying. If the IPO market is not too hot, people will try to price the IPO in the best possible way, leaving more value on the table which is good for retail investors.

zerodha new year plans

We are self funded so there are no fundraising plans for now. For this year, helping our customers reduce money mistakes is at the top of our priority list so we’re working on nudges and other features.

App downtime was a major issue during trading hours in 2017-2018 as we relied on third parties. In the last 2 years, which has seen the most volatility, if you look at our downtime, it is the lowest not only in India, but in the whole world. During the pandemic, when we saw high volatility, we probably had 5-10 minute issues while others were down for hours or days.

We are working to make it even better. Today, we have customers in 4 different setups, so even if there is downtime for an issue, it will affect one setup at a time. Even if there is downtime, it will affect the setup, the rest 3 are working. Zerodha has one of the lowest in the industry in terms of customer complaint % as compared to active customers.