The billionaire co-founder of India's Robinhood gives advice to investors

The billionaire co-founder of India's Robinhood gives advice to investors

2020 was a record year for equities as markets rallied against the escalation of the coronavirus pandemic. 2021 has also been promising amid a shift in the U.S. administration, the deployment of a vaccine and a still growing number of cases.


This has been a boon for retail investors seeking to make a profit and for the trading platforms they rely on.


Among them is the one called Robin Hood of India. At the peak of the restrictions in 2020, the brokerage company, which accounts for 15% of all daily retail sales in India, increased the number of registered users to 4 million.


"The pandemic has benefited us, and it's strange to say," Nikhil Kamat, co-founder and chief investment officer, told CNBC's Make It. "People had a lot more time, people were at home and, in many cases, they were in a position where alternative income could be very useful."


It was a victory for Kamat, which resulted in the 34-year-old man and his co-founder brother Nitin being given the status of a billionaire.


The ongoing stock market rally has raised concerns among analysts, who fear that a surge in demand from investment platforms has led to overvalued stock prices and could lead to a bubble.


But Kamat, who started trading at 17 after dropping out of high school, insisted his 11-year-old company was reliant on sustained investment by users.


"For a broker, we need our clients to succeed," Kamat said. "But in order for us to really grow as an organization, I think you need customers to make money over a long period of time."


"If we can advise people to be a little more sensible about investing today, even if we lose maybe 30-40% of what we're doing today, but it will allow them to make smarter decisions, make money over the next 10, 20 years, it will be good for the ecosystem and good for brokers," he said.


Kamat, who prefers big-cap stocks - the big companies that typically make up the major indices, such as the S'amp;P 500 - gave the top three advice to investors.


First, diversify, diversify, diversify.


"If I have something to say to retail investors, it's diversification, maintain some balance in your portfolio," he said.


"India is a very heavy real estate economy, so you'll find a typical household in India, where up to 60% of your middle-class family wealth is very closely related to real estate. We ask them to diversify through this and get two or three different asset classes into their portfolio," he continued.


Second, don't try to calculate time in the market or rely on debt to pay for assets.


"The only thing you understand as a trader, as an investor, after so many years of working in the market... it is that no one knows what will happen tomorrow," Kamat said. "It's kind of impossible and pointless to try to make this prediction, so we ask people not to use the levers as much as possible."


Finally, set a stop-loss or the maximum amount you are willing to lose.


"You could put all the research and work into a particular idea, but when something doesn't work out, you need to maintain the ability to take your losses early on and be able to get away from it rather than being selfish," Kamat said.

13 января, 2021

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