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The billionaire co-founder of India’s Robinhood has advice for investors

2020 was a list year for stocks, as markets rallied against the escalating coronavirus pandemic. 2021, too, has kicked off to a promising start amidst a change in the U.S. administration, vaccine rollouts and still rising cases.

That has been a boon for retail investors looking to attack a profit, and the trading platforms they rely on.

Among them is Zerodha, dubbed the Robinhood of India. At the height of lockdowns in 2020, the brokerage — which accounts for 15% of India’s come to daily retail trades — saw registered user numbers double to 4 million.

“The pandemic has been good to us, which is a unknown thing to say,” co-founder and chief investment officer Nikhil Kamath told CNBC Make It. “People had a lot more on many occasions, people were at home and, unfortunately in many cases, they were in a position where an alternate income could have in the offing been very useful.”

That has been a win for Kamath too, catapulting the 34-year-old and his co-founder brother, Nithin, to billionaire reputation.

Trading higher

The stock market’s continued rally has sparked concern from analysts, who worry that a breaker in demand from investing platforms has overinflated stock prices and could lead to a bubble.

But Kamath, who began dealing at 17 after dropping out of high school, insisted that his 11-year-old company depends on sustainable investing from buyers.

Nikhil Kamath, co-founder and chief investment officer at Indian brokerage Zerodha, trades at home.

Zerodha

“For a intermediary, we need our clients to do well,” said Kamath. “But for us to truly grow as an organization, I think you need for the clients you have to frame money over a large timeframe.”

“If we can advise people to be a bit more sensible about investing today, even if we let slip maybe 30%-40% of what we’re making today, but that allows for them to make smarter decisions, hand over money over the next 10, 20 years it’ll be good for the ecosystem and good for the brokers,” he said.

Advice for investors

Kamath, who has a pick for large-cap stocks — the big-name companies that typically populate major indices like the S&P 500 — laid out his three outwit pieces of advice for investors.

Firstly, diversify, diversify, diversify.

“If I’ve one thing to say to retail investors it’s diversify, maintain some well-intentioned of balance in your portfolio,” he said.

“India is a very real estate-heavy economy, so you would find a typical household in India, a middle-class household has as much as 60% of their opulence very closely tied into real estate. We ask for them to diversify out of that and get two to three different asset classifications in their portfolio,” he continued.

Phone displaying the app interface of Indian trading platform Zerodha.

Zerodha

Secondly, don’t try to opportunity the market or rely on debt to pay for assets.

“The one thing you realize as a trader, as an investor, after having spent so many years in the make available … is nobody knows what will happen tomorrow,” said Kamath. “It is kind of impossible and pointless to try and announce that prediction, so we ask people not to lever as much as possible.”

Lastly, set a stop-loss, or a maximum amount you’re willing to lose.

“You capacity put all of the research and work into a certain idea, but when something does not work out you need to retain the ability to assume your losses early and be able to walk away from it and not be egotistical,” said Kamath.

Don’t miss: How this 34-year-old chess defend became India’s youngest self-made billionaire

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