Zerodha’s Nithin Kamath On How To Make Peace, And Money, With Stocks

The chief executive of India's largest brokerage has a few tips and tricks for stock market investors.
<div class="paragraphs"><p>Nithin Kamath, founder and chief executive officer of Zerodha Broking. (Photographer: Karen Dias/Bloomberg)</p></div>
Nithin Kamath, founder and chief executive officer of Zerodha Broking. (Photographer: Karen Dias/Bloomberg)

The chief executive officer of India’s largest online brokerage urged investors and traders to build habits that will help them make sensible decisions if they're to succeed on the bourses. Chief among them is to make peace with losses.

“The trick in trading and investing, is that when you're right, how do you make sure you make more than what you lose when you're wrong?” Nithin Kamath of Zerodha Broking Ltd. asked in an interview with BloombergQuint.

He recommends letting winning stocks run and cutting losers. “That’s a really basic kind of concept most retail traders tend to forget,” he said. “They try to cut short their winners and let their losers loose."

“If you cut your winners then there’s no way you can make money in this,” he said, pointing out that a disposition bias affects most traders in such situations.

One key reason why investors can't sit on winners, according to Kamath, is also because they are overextended—or they're putting too much of their capital to trade. “If you have too much at risk you get scared.”

Which is why he suggested a rule of thumb: trade with money you can afford to lose. “If you're not comfortable with it, you’ll end up breaking the first rule, which is not being able to sit on your winners," he said.

Also you will end up making a lot of money mistakes because physiologically as well, when you're scared you actually do stupid stuff.
Nithin Kamath, Chief Executive Officer, Zerodha Broking Ltd.

He urged investors to factor in their worst-case scenario of losing their entire money on the bourses. “For some people it’s 1%, for some people it’s 5%, as in can you take the trade and not be bothered about it?”

“What it means is essentially at that point you're really making peace with your worst-case outcome.”

People who get bothered with that 1% loss should avoid trading, he said. “You don’t want trading to affect your personal or professional lives, as in if you're working somewhere you don't want to be bothered about the stock market every minute because you’re not going to probably do well in your walk of life as well.”

Here's the edited excerpt of the interview:

Nithin, you have multiple years of experience, maybe as a trader as well and please correct me if I am wrong and then eventually running Zerodha and taking it to the scale that it is, but does the market activity currently boggle your mind, or is it something that you've seen in the past as well and it's one of the many things that have happened?

Nithin Kamath: This is something different for sure, because back in 2008 I used to be a sub-broker for Reliance Money, and I still remember, January of 2008, I had a small office like a franchise of Reliance Money, the Reliance Money board on it. I walked in one day in January and I see a long queue outside the office I am shocked because you never see a queue outside an office and this is essentially people standing in a queue for Reliance Power IPO, they all had these IPO applications and they all thought that somehow if you apply through Reliance Money the odds of getting the application done is higher. Last weekend we opened 50,000 accounts on a Saturday and a Sunday. I have no idea, I mean I have no idea why there's so much euphoria but this is different and I haven't seen activity like this ever before. I get up every morning very pessimistic thinking shits going to hit the fan, but a lot of my friends who are in the VCMP world, they seem to say, it's different this time. So, I am trying very hard to believe in it. I'm just hoping this isn't like Something that just goes up and comes down in terms of activity, but generally I think with macro, there are a lot of things going right for India and I hope whatever people are saying is right. Generally, as a trader also I've always been pessimistic and I'm always trying to kind of factor in the worst-case outcome and it kind of has allowed me to run this business well anywhere in my trading days. It has held steady, not getting overexcited. I think trading and running a business, I think are very similar to each other.

So many people say that you can build a successful trading investment career I don't know about trading as much but an investment career, or maybe build a business if you are optimistic about the future, you are saying quite the opposite.

Nithin Kamath: You have to be overall optimistic; you have to assume; you have to be at every point thinking that they will be alive tomorrow. I mean why I'm saying, this whole factoring will bring in the worst-case outcome that every point of time, is a very important aspect of long-term, non-volatile kind of a performance as a trader and as a business as well. Now just because markets are too high should I go and throw and put all the money upon marketing and advertisement as a business? Or if I'm a trader do I just go all in just because markets are doing well? It's very similar. The way I look at it is, if I can't sleep well in the night. that means I'm overextended as a trader and as a business. So I think it's very similar. I personally think as a CEO you're essentially a capital allocator. I mean you're trying to figure out where your best odds are where can you allocate capital and resources and where can it potentially give you the best outcomes, and you're doing exactly the same. You're buying stocks or trading. So, you are trying to figure out which can potentially give the best output. So, some of these trades make money, some don't and it is the same in the business. I mean, every 10 decisions I take I'm probably right, maybe five or six times and I think the trick in trading and investing and in business, is that when you're right, how do you make sure you make more than what you lose when you're wrong? That's a really basic kind of concept most retail traders tend to forget. They're trying to cut short their winners and let their losers loose. This is really, I think, if there was one thing that I could teach someone about trading and business I think that's, to let your winners run and cut your losers because if you cut your winners for us, there is no way you can make money in this. No way money and running a business or trading is very similar. So now, you take 10 different ideas you put it in play, you see which ideas you're seeing some kind of a good response and then you put more meat behind those ideas. It doesn't mean that you stop those ideas, and then try to make what's not working work for you, and that's exactly what people try to do with stocks. This whole thing called as disposition bias which I think affects almost all traders. I mean, I'm not even talking about retail, I've seen this thing, the smartest of the books. I mean, education, 25 years of experience but then when you're buying stocks and if you lose money, you don't want to accept the loss and pretend to average it down and then once it starts getting ugly then you try to sell your winners and try to average down your losers. I think trading in business this really, this small little aspect is very similar to be successful in other places and then at the end of the day all of us depend on luck, being replaced at the right time is very important, so you could follow all these rules and still make money or be successful, but I think it just improves the odds of being successful. “If we can keep this concept, whatever be the size. Even if someone who's doing it by 5000 rupees and has 5000 rupees in his trading account, I think it's about building those habits, because these things stick on. It is very tough to get over these habits, they are like bad habits. So, that probably would be one thing that everyone should keep in mind.”

Okay, so let's talk about the things that the new age investors should keep in mind because I believe a bunch of your new 50,000 accounts on a Saturday, will also have those new age investors. What are the things that you would caution some of these traders/investors about?

Nithin Kamath: So, the good bit about 70% of all our accounts today are first time KYC accounts, in the sense they've done a mutual fund investment but they haven't done a stock market investment. So they're really new to the market and the average age of this new age customers is just dropping significantly, from 27 to 26 and it's coming lower and lower. Now the good bit about all of this, I'd say why this is different from last year is that these guys have a lot of human capital, as in, they're not putting a lot of money, they're putting 5000 and 10,000. So, what we can do to the market is also very little and then in the context of how much you can potentially earn in the future, it's actually insignificant. I mean if a 25-year old if he puts 25,000 rupees in the market and even if he blows it out doing some mistakes, he is just starting his career it is actually not so bad as compared to a 50-year old who out of his portfolio of whatever, it falls down say 30 or 40%. So, it is almost impossible to come back when you're in much later and you're being very aggressive and you're doing a lot of mistakes, but when you're younger you can really bounce back really fast. I think one good bit about this is the rush of first time investors because they're all young and they're actually losing smaller amounts of money if they do mistakes, it means that it may be not as bad as before. Historically, even in 2008, the average of the first-time investors was much higher. I mean these were people who were allocating from their already existing savings. Today people are trying to create savings by coming to the markets. That is the optimistic angle of me saying it. These are young persons and even if they were to make some mistakes, it is not as bad. But what can people really keep in mind, I don't know if it's younger or older, I think the rules of trading and investing is really the same. As one like I said earlier is to make sure you let your winners run. That has to be the most fundamental thing you have to ingrain in yourself and the reason I'm saying this is because I've interacted with a zillion traders. I've been running communities from early 2001 with online messengers like Yahoo Messenger, Orkut and Facebook all these communities where people interact with each other and I'd say, that not being able to sit on the winner is really the biggest problem that traders and investors have. One of the reasons people can't sit on winners is because they're overextended, which means they're putting too much of their capital to trade. So, if you have too much at risk you get scared. So, the second I think important thing is to only trade or invest with money which you're comfortable with. If you're not comfortable with it, you will end up breaking the first rule, which is not being able to sit on your winners. So, if that money which is on the table is something that you can't afford to lose or which bothers you, you will end up making a lot of money mistakes because physiologically as well, when you're scared you actually do stupid stuff and so you don't want to put yourself in situations where you're scared about your money. You most likely will end up doing something which is not very smart. I think that’s when it comes down to asset allocation. Technically, as in how much you actually allocate to equity where you're comfortable with that allocation. If you're older, I think it should be lesser. If you're younger, it could be more because like I said, when you are younger there’s more potential to it.

Isn't that the rule, 100 minus your age?

Nithin Kamath: That works for equity investing, I think if you are talking about trading it's a different ballgame. I think with people really actively trading in the markets, it should be lesser. When I used to actively trade, this was a lesson learned after blowing up a couple of times. So, when I was actively trading the market for me, every trade my stop loss used to be like a 1% of my trading capital. So, whatever was my trading capital, like at any point of time I was just trying to make sure I don't lose more than 1% of it. For example, if say I have 10 lakh rupees, the idea is not to lose more than 10,000 rupees. So now if I want to buy options, I think this whole rush in active trading right now is mostly in options, 80-85% of all active trading right now is coming in, is in options. I think people don't understand the leverage options that they bring on the table because people when they buy the premium they think premium is like the value of the stock they're taking exposure to. So, with 10,000 rupees in your account you could potentially buy 25 lakhs worth of Nifty. If you buy four lots, it would be worth 25 lakhs worth of Nifty. You can buy four lots of Nifty with a 50–60-rupee premium, which is 10,000 rupees in your account so when people buy options, I think you should look at options, I don't know if it's the right example or that comparison but I think you should just look it up as a lottery ticket in a sense, at least in terms of how you measure risk. You shouldn't look at options as there's a stock that I can sit on and grow along with it. It doesn't work like that, it expires and your time value is just against you all the time. I think it comes down to asset allocation and it is a very important aspect of a trader. If you're doing equity investing, like you said, 100 minus age as an exposure to equities is not a bad idea and within that equity exposure, have at least a minimum of five stocks, if you are equity investing because one of the big other problems here is that people get concentrated over a period of time. Like most of the cases, I had written about this long back, when the whole Yes Bank debacle happened we saw it happening, in the sense, people selling everything else to average down on Yes Bank now because something which feels cheap at 100 rupees feels even cheaper at 50 rupees and better at 25 rupees and then most people generally also have this ego of not having to accept their mistakes so you're trying to make your wrongs right by throwing good money at bad men. This whole asset allocation and ensuring that you're not concentrated into a single stock in sector is something that we were trying hard to educate your customers. Actually, the next big play for us at Zerodha is to see how we can figure and how to make this all happen on the platform and it also can be while a person is placing an order, we tell him that this is a mistake. So, we're doing it already, there’s this place called ‘Nudge’ when someone's buying a penny stock at Zerodha, we scare the shit out of the customer, saying no, that you know that there's no business and stuff like that. A lot of times what happens is, the exchange has this list of stocks where people are trying to manipulate with SMSs and messages on social media with these penny stocks itself. So, we don't even know if it is worth purchasing those stocks. It might seem paternalistic and it seems like pushing people on a ledge, but it isn't. People have a way to hop over it. Our idea is just to give like a warning and see if we can actually educate folks on some of these mistakes which is, like I said, the first one. We see people selling the winners trying to buy more of the losers. Can we tell people during the order flow, that this is a mistake, right? Now because of webinars like this or writing books or podcasts, etc., your audience really who is watching is 1% out of everyone. Today in a world where there's Netflix and TikTok and this whole distraction of short form content, only a few people actually sit and get themselves educated saying what is right and what is wrong and etc. So, everyone else is generally acting on impulses and what we've seen is, on that order path, when you're placing an order, we have undivided attention from the customer for a few seconds. From the time you have decided what stock to buy from the market, then you say ‘buy’ and then you confirm it. So, the two or three seconds you have, that really is a place we have infinite power over the customer and we have realised that the best form of education is probably in those two, three seconds. While we're on Varsity which is the second or the third largest platform of education of capital markets in the world, but in terms of impact, I think we can have a larger impact through those two, three seconds. It's almost like, you go to Amazon, and you're trying to buy an iPhone, and say, Amazon knows that your salary is 50,000 rupees per month and you're trying to buy a one and half lakh rupee phone. Ideally Amazon shouldn't sell that phone to you, I mean, what are you smoking? Why would you? But in a capitalistic world it's very tough to expect people to do it but Amazon potentially could educate the user by saying, your salary is 50,000 maybe you shouldn't be borrowing one lakh rupees to buy the iPhone. So, we realised that, that piece the whole engagement piece through the order form is where we could maybe inculcate all of these good behaviours.

Can you tell us, based on your experience as a trader and running a platform which is as dominant and as powerful and as however data driven Zerodha maybe, is there a sweet spot you use, you mentioned that you made sure that you don't lose 10,000 as 1%, but what is that sweet spot that people should keep in mind that if their trading capital is X 1000 or X lakhs, what are some of the numbers that they should keep in mind? Do you have any sense of something like that or am I throwing something out of the blue?

Nithin Kamath: I think one aspect of our business, while we are tech first, we have a killer tech team and one thing that we haven't done as a business is actually sit and analyse data. Now in terms of trading data, and the reason for this is because our whole philosophy has been that we wouldn't want to do something to a customer that we don't want to happen to ourselves, right? In essence, we never have till date ever pushed a notification to a customer based on his data, we have never done that. If someone has received a push notification on our app, it's a generic push notification that we send to everyone. So, this whole data mining, there’s no data analytics team, there's no data mining team. So, in a sense we haven't taken this stance as a business, but potentially we could. We could do it, like, whom should we send a loan to, and who is not trading for a while, whom can we send an email that can trigger him to trade more? Now every almost every broker does it, but we've taken a stance that we wouldn’t do it and it is more philosophical one. I think one of the reasons that we've been able to grow the business without actually marketing and advertising. I don't know how many B2C businesses in the world can claim that especially in financial services. Brokers today in India have spent between 3000 to 4000 rupees a user as a cost of acquisition, and you spend zero from day one. I think these philosophies, if I look back in time right from day one, this is not something that is we've thought over 10 years of being in the business but right from day one we haven't done that. We have tried to trigger customers to trade. We haven't upsold anything to the customers we haven't done it. Now, we could potentially go to unsecured loans based on all the data we have, or we could sell it to someone. Like I said, I think it also goes back into this whole trading which is having a philosophy and sticking to it.

Let's assume there is no data analytics, but is there a number in your mind?

Nithin Kamath: I spend at least an hour a day tracking traders. I've done this right from 2000, so there is at least 20 or 30,000 hours of interacting with traders online.

Please tell us.

Nithin Kamath: I’ve actually written it in a post about this, it's really tough to determine this 1%, 5% or 10%. I think the easiest way to determine this is, can you take the trade and walk away and not bother about looking at your screen or get updated about what's the price. It is about really, the right number. For some people it's 1%, for some people it's 5%, as in can you take the trade and not be bothered about it? What it means is that essentially at that point you're really making peace with your worst-case outcome. If you can walk away, that means whatever can go wrong, will not bother you too much. For some people if you get bothered with 1%, you shouldn't even be trading—that means you don’t want trading to affect your personal or professional lives, as in if you're working somewhere you don't want to be bothered about the stock market every minute because you're not going to probably do well in your walk of life as well. So if it bothers you too much, you should just not even bother about trading in the markets at all. If I had to look at the average of the crowds and give a number, I'd say I'd actually done this interview with Jack Schwager and this was a few years back. I asked him exactly the same question saying, what is that right number and he said all the successful traders that he has interviewed, he realised that in some form, everyone is between 1% to 2% per trade. Some people keep only 1% in their account, if I have 10 lakh rupees I'll keep only 10,000 and just go completely ballistic with it. I’d go as aggressive as possible and try to turn that 10,000 into 10 lakh rupees keep it with options or whatever. But then you know that you have 100 such bets that you can take and the odds of hitting in one of those bets are quite high. I think if someone's actually actively trading in the market, I think this whole bet sizing is a very important aspect of the business. While there's not a lot written about bet sizing in the trading concept, but if people like poker, there are a lot of books around bet sizing in poker and there are a lot of parlances with trading in the markets as well, which is you just can't constantly have the same bet size and make money in the markets. I haven't seen people do it. For example, you can’t say in your head, you have 10 lakh rupees and say two lakh rupees is what you’d use for a single trade. If you are going to use 50 trades and you're going to use two lakh rupees on every 50th trade, net-net at the end of it will most likely not have it. So, it's important to know when to do 10,000 rupees when to do two lakh rupees and when to do probably a little more. So, you need to know, how to be able to vary your bet size based on how the trade is playing out and this is a concept that most people don't understand, and also what I've seen is that the way people think of bet size as a way, of really how to recover. As soon as someone has a drawdown the bet sizes increases. So, if someone started going well, let's say 10 lakh rupees and there was a 50,000 rupee drawdown, what everyone needs to understand is, every single trader has a drawdown. There is not a single trader on this planet earth who can claim that every month, every day, I want to keep making profits. So, once you hit that peak number, say a trader has 10 lakh rupees as a notional value of his account as a peak number, and he is at 9,50,000. His bet size goes off and he says, how do I recover my 50,000? So when there are drawdowns what I've seen with most traders is their trading activity or their trading size increases. It has to be exactly the opposite. When you have drawdowns, you need to reduce your trading activity and trading size to as little as possible and then once you start doing better and then maybe start increasing it. I've seen so many traders who do well for six months, eight months in a row and then have one stupid week, where they give it all, all their gains and more in that one week, all because they're trying to quickly make up for that drawdown by increasing the size of trading. Like I said in stock markets, and even in business when you're running a business, you could potentially have five shots that you take as a business or as a trader which consecutively may not work. So, how much can these five shots hurt you, is the question. If it's going to significantly damage you and make it almost impossible for you to come back up, then why take it. The last thing what happens in a market, I’ve seen it with most traders that I have interacted with, if your drawdown is 50% and more then you have started trying to buy options, all the buy options which is like a proper recipe for disaster.

Audience Question: Vijay is asking, that is it a common phenomenon that new investors tend to pop it when the market is rising but how many of them stay when the cycle turns in percentage terms is the question. His question predominantly seems to be that, he's asking that the ratio of new investors coming to market is significantly higher or is it the same in every bull market?

Nithin Kamath: This time it is significantly higher. Like I said, 70% of all our customers are first timers to the market. I think with us because we charge an account opening fee, etc., I think we have probably lesser, if you actually pick up some of the new brokers, who are not charging an account opening fee, I'm guessing, even more than 70% of the customers will probably be a first timer in the markets. Like I said earlier, it's a much younger crowd, I don't think such a crowd has ever existed in stock markets before. I can't remember a lot of 25-year-olds in trading the market when I was 25 years old. I had interacted with 40-year-olds and 50-year-olds. I think that has significantly changed this time around. In terms of activity and markets bull run, you are absolutely right. A lot of people asked me like, Nithin, what do you think will happen to Zerodha as a business? My usual answer is, can you tell me what will happen to Nifty I can tell you what will happen to Zerodha because we are a mirror image to the Nifty mid-cap index. In terms of new user additions, if the Nifty mid-cap index is going well, then new user additions are going well. If it's a drawdown, it drops. In terms of the activity on the platform itself, any drawdown in Nifty of more than 10% our activity drops 30%. So, we are in a very high beta kind of an environment. Even like this, a very simple behaviour of customers watching their portfolios, I used to see it happen when I was younger. My dad used to invest in stocks, and his favourite activity in bull runs was to open The Economic Times and see the stock prices. He used to make circles and he used to have all these designs, and by the time I looked at The Economic Times, he would have spoilt the whole thing where the prices were published. So, investors have the same behaviour even now, as soon as there is a drawdown people don't want to see portfolios.

Audience Question: Gireesh is asking, is it necessary to take training for trading from trainer or market experts or by self-learning too, can one become a good trader?

Nithin Kamath: I think trainers help but it depends on what kind of a trainer the person is. Anyone who is claiming that he will somehow help you make money in the market, then the dude is lying. If someone says that come to me, I’ll make you play the guitar, he is lying because to be a good trader, there are skill sets required. You need to have kind of a genetic making for it. Of course, there are traders who manage to break even, they look at trading as entertainment, it makes a lot of sense to do it so but this whole, I'll help you make a 10%, 20% or 30% come to my course—there's nothing like that. So, when you're picking trainers, if people can help you understand the concepts of trading well which is, this whole picking the right stock, I know some really great traders and they're right 6 out of 10 times, if someone's claiming that they are the right 9 out of 10 times they're not being true. It is not about picking the right stocks, it's about what you do, how you are in your mind frame, your risk management, how do you look at losses etc. If someone's going to train you on all of these I think you should go get a trainer. I think in today's world there is enough and more content out there. I don't think India-specific there's too much content being built, but it doesn't matter. If you are a trader and if you are trading in Sensex or Nifty, the rules are the same. So if you find a good trainer I think you should do it so but if a trainer claims to say, I'll make you a rich person from my training, stay as far away as possible.

Audience Question: An anonymous attendee is asking if it's possible to make consistent money by trading for an experienced trader, I don't know this breed but if you do, can you please tell us?

Nithin Kamath: I've been quite open about it I don't know if too many brokers actually come out and say it. We've also taken a stance as a business that maybe the regulator—I mean internationally, some of the regulators are hinting ESMA. The European regulator has kind of asked the currency trading brokerages in Europe to do it, which is to publish data of successful traders because people need to know that making money in trading activities is very tough. A lot of people who come to the markets, think it is easy. I’ve said this before stock markets is the toughest way in the world to make easy money. You have better odds in buying lottery tickets than trying to come into actively trading markets. The reason is because when you hit a lottery, you're not going to take all the money and buy more lottery tickets but when you're trading and you hit it, you bring all the money back to trading. In a lottery there isn't this whole concept of getting out early. Once you have a lottery ticket, you have to wait till the results are announced. The problem in trading is, like I said earlier, people don't sit on their winners, you could be on the biggest lottery of your life and could just exit. So, it is very tough to make money trading, and I only know 1% of the people who actually managed to make money trading consistently over a long period of time. Now, how does this 1% compare to the rest of the world? It's actually comparable to anything else and if you take 100 businesses who start it, only 1% actually makes it through. If you go to your school and pick up 100 people who wanted to become an engineer from IIT maybe, that number is even lesser. So, the odds of succeeding in life, in any field is actually less and it's quite less than trading as well but the problem with trading is, it makes it very easily accessible for all. It is not like a business. Now if you think of a business idea, you have to go raise capital, find a place and do all of that. With trading you can go open an account with us in five minutes and put money in and start trading. I think that's why trading is very dangerous and makes it very easily accessible for everyone. We've been quite honest about it if regulators eventually ever enforce it, I think every brokerage should actually publish anonymous data of how many people trade, how many make money, how many lose money etc.

Audience Question: Rishabh Surana asks whether you prefer value investing or technical analysis for whatever you do, and the reason behind choosing any one of the same.

Nithin Kamath: I would say that I have actually stopped actively trading from the time Zerodha started. My younger brother does all the trading, and he does it full time, but I do invest in start-ups. I think I am into value investing, because I'm not really trying to do anything short term but I'm a big believer in trends. In a way I think the good thing about technical analysis is that it generally gets you to go along with trends. For example, I have never been this wrong about life in the last one and a half years now, I've been predicting a fall in play since March 2020 and the business has only gotten better. This just shows the power of trends, the fact that we are in the trend. So even my views being wrong makes no difference for the business. I think everyone should use technical analysis to make sure you're not going against the trend.

Audience Question: Shwetuk is asking, given the odds that you stated against making money in trading, do you think investing is a better bet, and one should refrain from active trading?

Nithin Kamath: I don’t think that active trading is meant for all, active trading is a lot of entertainment. If you're looking at it as entertainment and if you want to learn about finance, money and yourself, I think active trading is a great way but I would say keep 5% of your whatever liquid net worth or whatever you can afford to lose in active trading. If it doesn't work then try stock trading. Active trading is a black hole you can throw as much money as you can, and the markets will suck it. I remember the Naseeruddin Shah movie where he had to spend 30 crore in 30 days and in the long-term he’d be ‘malamal’. So, if someone would’ve given me a 100 crore and would’ve said, lose 100 crore in a day, then I would have spent it in the active markets. So, active trading is not for all. I think investing should be what most people do but trading is something I think what most people should experience to see if they're good traders because if you have hit the genetic lottery and you're good at it—I've traded for about 12-13 years of my life actively and I think that's the best thing that I've done. So, it's very exciting.

Audience Question: Gireesh is asking, you are in the trading business but being an investor, may he know the asset allocation of your investments like equity, debt, Gold, investing in businesses and real estate and finally trading?

Nithin Kamath: All my trading is handled by Nikhil now, but we do invest quite a bit in private markets which I take care of. I think that I've been lucky as if I have won lotteries in my life. So I am kind of beyond that point where I have to really bother about asset allocations.

Audience Question: He is asking what's the duration, considered for active trading, is it like selling on the same day or two, three days a week, so what is ideal, day trading or positional trading?

Nithin Kamath: I think the difference between trading and investing in my head it is, if you are entering with an idea to exit it is a trade but if you're buying into something without an idea to exit, then it's an investment. It's as simple as that.

Audience Question: Somebody has asked why do you close trading at 3:20 p.m. instead of 3:30 p.m.? Do you want to answer that very quickly?

Nithin Kamath: We don't close trading; we don't allow leverage trading for the last 10 minutes. The issue with the leverage trades is, if you are a customer holding a short position and there was a tech issue then we need at least 10 minutes to square off positions otherwise our short position can be a short penalty margin on the user. So, it's very risky. I think our industry standard as a whole, is around 3:20 p.m., so that is what we follow.

Can you compare poker and trading, and do you reckon that there are too many similarities between the two?

Nithin Kamath: Poker and trading and running a business and I love all of them and I think it's all very similar. If you look at it at the end of it, it is all about betting the right hands and bet sizing. It's about being in it when you're right and making sure when you're losing, you lose as little as possible. So, I think the rules are the same everywhere.

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