Whether its trading or investing, market participants often draw inspiration from different subjects, sometimes completely unrelated to the world of stocks. For Nikhil Kamath, co-founder and Chief Investment Officer at Zerodha and True Beacon, chess was a passion since his childhood!
“When you are playing chess, you are trying to control the center, develop your pieces, castle as fast as possible. Those are basic principles of the game. The same kind of rules also apply to trading, for example, in how you place a stop loss, how you handle leverage,” Kamath told ETMarkets in an interview.
The stockbroker and money manager played chess as a regular sport as a teenager and even competed at the national level, but had to give up that passion after he dropped out of school at the age of 17 to start stock trading, as the entrepreneurial pursuit took away his free time.
“You have to be fairly structured in chess. The same rules apply to trading as well. Chess taught me the importance of following a structure, beyond which you can be creative,” says the 31-year-old Bengaluru-based billionaire.
After the success of Zerodha, India’s largest stock broking platform that he started with his brother Nithin Kamath in 2010, Nikhil started a hedge fund – True Beacon – two years ago to manage money for HNIs and ultra-HNIs.
Just like how Zerodha disrupted the stock broking industry with its zero-fee model for equity delivery and a nominal fee of Rs 20 for intraday and F&O trades, True Beacon is trying to be a gamechanger in the AIF industry by being cheap and efficient.
“Our AUM is growing at a rate of 15 per cent month-on-month. People like the fact that we are a lot more transparent and cheaper than our peers. We don’t have management fees and entry or exit loads,” Kamath says.
His fund aims to beat Nifty by 6 per cent on a multi-year basis. “We have been able to navigate these markets better than most fund managers. Since the start of March, 2020, till end of February, 2021, our fund has outperformed Nifty by 22.5 per cent and generated a cumulative return of 44 per cent. This, we have been able to do by being smart about how to hedge our portfolio and manage the downside risks for our clients,” he said.
On his outlook for the market, Kamath said he would not recommend investors to build too large a portfolio without putting sufficient hedges in place, given the fact that Nifty is still trading at higher-than-average multiples.
True Beacon is busy making allocations in largecap IT and pharma stocks. “For a market that is overpriced, I think these stock do a good job of providing a safe place to hide,” he said.
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