‘No shortcuts to getting rich’: Zerodha CEO Nithin Kamath flags ‘middle-class trap’—What it is, how to escape it?

Zerodha co-founder and chief executive officer (CEO) Nithin Kamath shared a simple yet crucial advice for investors: The secret to building wealth lies in patience and discipline, and there are 'no shortcuts' to getting rich. The Zerodha chief highlighted that the irreversible ‘middle-class trap’ makes it difficult for people to escape the never-ending financial loop.

Kamath took to the microblogging platform ‘X’ (formerly Twitter) and said in a post that he is often asked for stock tips or something that will make people rich. “Unfortunately, there are no shortcuts to getting rich. It takes good habits and patience,” said the market expert. He also highlighted that people should avoid buying stuff they don't need or, worse, borrowing to buy them.

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Kamath's post on ‘X’ read, “I often get asked for a stock tip, something that will make people rich. Unfortunately, there are no shortcuts to getting rich. It takes good habits and patience. Things like buying stuff you don't need, or worse, borrowing to buy them. The other big one is not having health insurance. Things like these can really hold you back. Zero1byZerodha and Prateek Singh do a fantabulous job of explaining the middle-class trap.”

Middle-class trap: What does it mean? 

Apart from the above advice, Kamath also shared a clip of Zero1ByZerodha, where founder and CEO Prateek Singh explains why people feel stuck in a ‘never-ending loop of ‘work hard, get a job, take a loan, buy a house, and dress to impress.’ Singh says this is ’ terrible advice', and people will never come out of the loop. Singh points out that the root of the problem is that people treat their salary as a stream meant to be spent, not saved or grown.

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How can one escape the middle-class trap?

To further explain the trap and how to escape it, Singh says that people must write their own rules. Firstly, one must jot down all monthly expenses and figure out ways to cut unnecessary or extra expenses out of the monthly figure. Once decided, cut down just one per cent of the monthly expenses and invest that money in a tool every month, such as an index fund.

According to the expert, building an emergency fund is equally important. One must figure out how to save a fund worth six months of monthly expenses, enough to survive half a year without a job. For example, if your monthly expense is ₹30,000, build an emergency fund of ₹1.8 lakh and save it aside.

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He also highlighted the importance of building a health emergency fund and the need to realise the importance of having a proper health insurance plan amid rising medical costs and inflated hospitalisation bills. He concludes by saying that investors must not chase returns but stay disciplined regarding fixed investments and let their money grow over the years.

Zero1 is a new-age media network that demystifies money through data-backed storytelling. The discount brokerage owns it. Zero1 is a Joint Venture between LearnApp and Zerodha. The digital platform aims to simplify the jargon-filled world of money (cash) and wealth (health).

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