2020 was a record year for stocks, as markets rallied against the escalating coronavirus pandemic. 2021, too, has kicked off to a promising start amid a change in the U.S. administration, vaccine rollouts and still rising cases.
That has been a boon for retail investors looking to turn 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 total daily retail trades — saw registered user numbers double to 4 million.
"The pandemic has been good to us, which is a strange thing to say," co-founder and chief investment officer Nikhil Kamath told CNBC Make It. "People had a lot more time, people were at home and, unfortunately in many cases, they were in a position where an alternate income could have been very useful."
That has been a win for Kamath too, catapulting the 34-year-old and his co-founder brother, Nithin, to billionaire status.
The stock market's continued rally has sparked concern from analysts, who worry that a surge in demand from investing platforms has overinflated stock prices and could lead to a bubble.
But Kamath, who began trading at 17 after dropping out of high school, insisted that his 11-year-old company depends on sustainable investing from users.
"For a broker, 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 make money over a large timeframe."
"If we can advise people to be a bit more sensible about investing today, even if we lose maybe 30%-40% of what we're making today, but that allows for them to make smarter decisions, make money over the next 10, 20 years it'll be good for the ecosystem and good for the brokers," he said.
Kamath, who has a preference for large-cap stocks — the big-name companies that typically populate major indices like the S&P 500 — laid out his three best pieces of advice for investors.
Firstly, diversify, diversify, diversify.
"If I've one thing to say to retail investors it's diversify, maintain some kind 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 wealth very closely tied into real estate. We ask for them to diversify out of that and get two to three different asset classes in their portfolio," he continued.
Secondly, don't try to time 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 market ... is nobody knows what will happen tomorrow," said Kamath. "It is kind of impossible and pointless to try and make 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 might 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 take your losses early and be able to walk away from it and not be egotistical," said Kamath.
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