Investing 101 A Beginners Guide

[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

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