Online trading platform Zerodha has launched a new YouTube channel to educate people about finance and investing, the company's founder Nithin Kamath said on Wednesday. The first video is on de-influencing, he said while sharing the link. Kamath said right from day one Zerodha has spent a significant amount of time and effort to educate people about finance.
"Since video was becoming the dominant way people consumed information, we also launched Varsity videos," he said, adding that along the way, they had been debating whether all the content the platform was publishing appealed to younger audiences. "We're launching a new YouTube channel called Zing! by Zerodha where we make finance a little more fun. The first video is on De-influencing."
The channel's first video talks about penny stocks and why traders avoid buying them. "In true deinfluencing style, we'll talk about the risks. The actual risks because nobody else talks about it," the video description reads.
The video highlighted two major risks - liquidity, and chances of manipulation - in buying penny stocks. "The problem is not the price of the stocks, the problem is that there are no traders - this is liquidity issue; the second issue is that a lot of these companies are fly-by-night operations (sometimes promoters are shady and sometimes business model doesn't exist)," the video said.
Kamath keeps reminding the investors not to take risky bets and think of making quick money. In a detailed LinkedIn post last year, the Zerodha founder said he was surprised at the fact that so many were surprised that just 1 per cent of active traders make more than bank fixed deposits over 3 years time-frame.
"Active trading is like running a business, only a small % succeed. The only easy bit about trading is starting trading," he wrote, adding that traders with an alternate source of income tend to do better or have higher odds of winning than those who rely only on trading for a living. "This is similar to how the businesses that are well-capitalized tend to do better than those that aren't."
Kamath said that the pressure to generate profits daily or monthly can lead to more mistakes. "So in a way, traders who also earn by talking or teaching trading have higher odds of winning. But don't trust every profitable screenshot that people share to find ways to make money from you."
Earlier this year, Zerodha got approval to enter the mutual funds business. Kamath said the platform's motivation to start a mutual fund was two-fold, the first was that the biggest challenge and opportunity for Indian markets is the shallow participation and the second was that if one had to bring in the next ten million investors, they needed simple products they could understand, and mutual funds were a perfect instrument. "We aim to be index-only and create simple funds and ETFs that all investors can understand and invest in for all their goals."