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