Investing 101: A Beginner's Guide | Nikhil Kamath | TEDxBITSHyderabad

[Applause] let's talk about stock markets let's talk about being an investor a trader i think everybody and their grannies and their drivers are entering the equity market right now so probably a good topic to talk about i'll give you like a few different chapters of my life where i have attempted trading and investing in different ways and what my learnings have been from that so i got into the world of trading and investing very early started full-time trading at maybe the age of 17. this was around 2003 2004 somewhere around that time at the very beginning when i got introduced to trading i was doing it with a finite amount of capital that i had saved up from my other job which was working in a call center i would make maybe eight nine thousand rupees a month then i would save this money and invest and try to buy and sell equity uh the problem when you're trading with such a small pool of capital a lot of you if you're in college will face the same issue is you will have to leverage and take margin to be able to make a reasonable amount of money so i had the same issue i would look at stocks which were in news and pretty much like you play roulette wheel i would pick a number in my case that was the company and hope the price of the company did go up i got very lucky initially the stock markets in many ways are very kind to first-time investors and most people who just start off tend to make money it's a psychological thing or whatever but the lesser you know tends to work in your favor a lot of the time so i bought this company called mars soft it was a tiny penny stock tech company at four rupees or something like that and sold it for 20 rupees and absolutely no reason why the stock should have gone up it was just blind luck but that was my foray into stock markets and like many other people i was hooked and addicted and even if i were to lose money 20 times in the future 20 times the amount of money i made on this one transaction i knew for a fact that this is something that gives me a high and a industry and a profession that i would continue to be in for the rest of my life so trading started like that betting blindly and hoping a certain company does well marsoft was the number one company this was followed by multiple bets on penny stocks which did well between the ages of 18 19 this was largely how i used to trade along the way i got introduced to a couple of books and fundamentally analyzing companies i think some of the few good books i read at the beginning were maybe uh benjamin graham's book a couple of like fundamental analysts both on shore in india and western peers three years four years of fundamentally analyzing stock got me to the realization that companies do not move based on how well they're doing fundamentally companies are a factor of sentiment and how many people perceive a company will go up or a certain stock will do well tends to move the company a lot more than you know technical factors the fundamental factors which might be supporting the company did this form of training for a few years uh followed it up by uh technical analysis technical analysis is the kind of trading where you look for patterns technical analysis is a very simple subject it it is bound by rules that what has happened in the past patterns from the past will kind of repeat themselves in the future so you look at charts you look at patterns made on charts historically then you attach a odd to that same pattern replicating in the future did this for a few years was big on candlesticks for anybody who's interested out there i think steve neeson has a couple of great books on candlesticks it's a great way to foray into the world of technical analysis you trade stuff like moving average crossovers i remember i used to trade the 2050 interval of moving average crossovers what technical analysis does very well is it's a lagging indicator so in a market which is trending where there is substantial momentum technical analysis will help you write the tide so to say and carry and catch a large part of the momentum that might be in a market especially if you were able to get in at a very early level when a trend is just beginning technical analysis happened for a few years three or four years uh this was followed by a quantitative phase uh trading on correlation mean regression essentially betting that say for example two two stocks have a certain correlation between them historically and if they digress from that relationship you write an algorithm which i want and short the other and you try to make that that divergence whenever it were to occur so in the quantitative phase i would have traded on you know penetrating delta hedging many statistical arbitrage kind of transactions which which involve catching smaller pieces of a pie instead of buying something at 100 and hoping it goes to 120 you would enter a transaction where you hope to make 20 bibs or 30 bibs but many times over after quantitative game uh sentimental analysis uh you kind of like try and weigh in on the sentiment prevalent in the market so i would attempt this by virtue of you know looking at what the promoters of a company are doing looking at geopolitical issues looking at interest rate cycles across the world trying to figure out money will move in which direction essentially typically when money starts flowing in one direction especially smart money by smart money i mean the money which belongs to institutional investors and not retail per se these guys don't act once and then change the direction they would typically once they buy something they come in like five or ten times later and add to their position did this for three four years none of these investment research methods kind of work for everybody or they work in isolation you need to read and check out each one of these implement them and see which one works uh best for you which one is uh best for your psyche and then you know figure out a combination of two of them or three of them and implement them in your own investment cycles at the end of the day when being a little bit candid here when you have to figure out uh how the economy is doing or how a certain stock might do in the future it comes down to the psychology of it all it comes down to how you are able to decipher uh what is happening at the back of the price of a certain asset class going up or down and i think a combination of these four methods will put you in a position where you will be able to do that to a reasonable extent india has a population of 130 crore people only about a few crore of that pay you know they file income tax even smaller proportion has direct or indirect exposure to equity markets i would put that number as maybe one and a half two percent of the country uh that number is set to grow uh relative to you know western developed economies where 50 60 of the population has exposure to equity markets we are still in the very nascent uh stage here in india and for any of you who choose to kind of you know take up this profession or work in fintech or broking or asset management i think the scope is tremendous uh you will have plenty of potential to grow and scale uh in this industry over the next 10 or 20 years i would definitely recommend more people attempting their hand at fintech and choosing this as a profession i mean so the two main things we do right now are broking and asset management broking under the brand name of zeroda is something we started uh 11 years ago now we were traders before we started zerodha the intention of starting zerodhar was to save cost the incumbent broken peers of 11 years ago were very expensive it was very hard for us as retail traders back then to remain profitable and kind of make a wage while paying half a percent brokerage to your broker so we kind of like decided you know let's get a membership ourselves we will not look upon this as a corporation but as a community where it is run by traders for traders and we will facilitate transacting at a cost which is maybe one tenth of what the incumbent peers of the day charged so zeroda has done very well in the last 11 years we have grown laterally we account for about 17 18 of all the volume that happens in the country today uh i think the biggest differentiator between us and other companies in in our sector is a we have never really taken in external capital it's a partnership between me and my brother and we have never really taken on money to go out and promote the brand which in turn will help us acquire clients we have been organic about the process throughout our our ethos has been let's build a better product and word of mouth is the best marketing tool and with a better product more people will come in and use our platforms and that has worked for us true beacon on the other hand is an asset management company it's a hedge fund it's a hedge fund which runs long short strategies on capital markets in india and manages money for select ultra hnis across the country uh we're trying to create a community of extremely influential investors both from india and outside whose money we manage and in turn we we also hope to be able to help their holding companies by virtue of connecting them with each other so that's what rubicon is attempting to do as well

Channel: TEDx Talks

Views: 165,956

Keywords: Business, Education, English, Finance, Investment, Money, Start-up, TEDxTalks

Id: mLeBa1BCEa8

Length: 12min 1sec (721 seconds)

Published: Tue May 25 2021