Nikhil Kamath of Zerodha on everything you need to know about investing and trading during COVID-19

On Money Matters with Shradha Sharma, Nikhil Kamath of Zerodha and True Beacon talks about trading and investing during the current COVID-19 crisis.

With COVID-19 affecting markets all over the world, investing and trading can be a tricky business right now. But, according to Nikhil Kamath, Co-founder and Chief Investment Officer at Zerodha, “now is not the worst time to invest”.

In 2010, brothers Nikhil and Nithin Kamath founded online brokerage platform Zerodha. The two started by focussing on day traders. Since then, the duo has grown the bootstrapped company massively, with zero external funding, becoming two of the most successful and well-known entrepreneurs in India.

Today, Zerodha has evolved to include both long-term investors and one-time investors. In 2019, Nikhil and Nithin also co-founded client aligned asset management company True Beacon, a Category III Alternative Investment Fund (AIF) for Ultra High Net Individuals

On Episode 6 of Money Matters with Shradha Sharma, Nikhil reveals how to trade during these uncertain times, which sectors to focus on, and everything else you need to know if you are a first-time investor.

Watch the full interview here:

Right now, Indians have to turn to the stock market for high returns. Fixed Deposit schemes are no longer giving us the kind of returns we had learnt to expect, and the government does not want people to buy too much gold. 

On the other hand, real estate also does not look like a profitable space. There are not many avenues left to allocate capital for the next three to five years, so everybody has to have some kind of exposure to the stock market, explains Nikhil. This, in turn, he says, is essentially the India growth story.

“The biggest lesson is to have normal expectations from the market; not try to enter and double what you have and expect extraordinary results,” he says. 

According to Nikhil, annual compound growth of 15 percent is a lot of money, and if you can come to terms with this outcome, investing can become a lot simpler. One doesn’t need to borrow to invest — just allocate a part of your savings for long-term substantial returns.

Investing during COVID-19

Nikhil says one shouldn't look at the market with short-term ups and downs as the market “doesn’t react to news”. 

He says, “You have to look at it from a different point of view — is it a good time to enter over for the next five years? No one can predict short-term outcomes.”

According to him, a lot of first-time investors — as people have so much time right now due to the lockdown — are looking at the stock market, especially people who have wanted to do so in a long time and finally have the opportunity to study and invest.

And if you were wondering which sectors to invest in right now, Nikhil says he “likes” pharma and IT as these sectors generally don't see too much short-term turbulence.

“They're good places to hide when things are not going okay. I personally don't really like real estate and the whole construction and infrastructure space right now because the repercussions of coronavirus will be significantly worse on commercial and residential real estate than other sectors,” he explains.

Nikhil also recommends FMCG, and cautions that companies which have borrowed in the last few years and spent 50 percent of what they make servicing that interest would find it hard to survive this crisis.

“I wish I knew what stock is going to go up. But, generally, it's a good idea — when things are not going well — to buy in the largest of companies and maybe stay away from small to middle cap. Don’t buy penny stocks, and keep this year’s portfolio among large cap companies. Buy Nifty stocks and keep like some kind of diversification,” he says.

Money is a job — nothing emotional

As someone who started trading at the age of 17, Nikhil shed light on having a relationship with one’s money. 

“The key remains to be net-up. You lose less and you make more, which comes with time and experience. When you're investing for a long time, you become non-emotional about money and making money through trading or investing. It becomes more of a job,” he explains.

According to Nikhil, a lot of Zerodha’s success can be attributed to luck.

He says, “In many ways, we got very lucky — where we were and when we were. It will probably be extremely hard to do the same thing and for it to work again today. We entered the ecosystem after the 2008 crash, so we did not have a lot of competition.”

Edited by Kanishk Singh


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