Active Stocks
Fri Sep 29 2023 15:59:14
  1. Tata Steel share price
  2. 129 1.78%
  1. NTPC share price
  2. 245.65 3.3%
  1. Power Grid Corporation Of India share price
  2. 199.85 -0.45%
  1. State Bank Of India share price
  2. 598.7 1.48%
  1. Wipro share price
  2. 406.25 0.11%
Business News/ Markets / Stock Markets/  Zerodha founder's advice on what not to do when your 'favorite' stocks are falling

Zerodha founder's advice on what not to do when your 'favorite' stocks are falling

Investing is risky & there are some important things retail investors should keep in mind, as per Zerodha founder Nithin Kamath

Photo: iStockPremium
Photo: iStock

Every time the prices of retail favorite stocks fall, the number of investors who buy the stock goes up dramatically, as per Zerodha founder and chief executive officer (CEO) Nithin Kamath, which has been seen in stocks Yes bank, Reliance ADAG stocks, and now with Zomato.

Earlier this week, Zomato shares crashed for two straight days post the ending of the mandatory pre-IPO (Initial Public Offering) shareholders lock-in period on July 23. The stock hit a record 159.75 in November 2021 and has been falling since then amid a global carnage in tech stocks.

The shine of new age tech stocks is fading away at a very fast pace. In the ongoing market correction due to geopolitical crisis and interest rate hikes due to inflation, share prices of all new age fintech startups have tanked significantly.

Investing is risky and Zerodha's Nithin Kamath, in a series of tweets, shared some important things that he thinks retail investors should keep in mind.

“In the business of investing, if a stock price is down and it seems like it is a cheap buy, odds are, it will continue to become cheaper. The optimal way to trade is to buy stocks that are doing well and sell them higher as they grow," Kamath adviced in the tweet.

Further, he said to avoid averaging down to reduce one's average buy price in the hopes of making a profit or breaking even IF the price goes up. “Yes, there are times when it works, but the issue with this strategy is that one bad trade is enough to wipe out all previous profits & more."

“We all suffer from Disposition Bias—we feel like selling stocks that are going up and hanging on to stocks that are falling down. To do well when investing, you need to do the opposite—hold on to winners and sell the losers," he suggested.

Advising to mix technicals with fundamentals, he said that a stock that seems cheap at 100 for fundamental reasons will seem cheaper at 50, tempting to average down. But technicals will show investors if there's a downtrend—a warning sign to maybe not buy, buy less, or exit.

“The most important aspect of investing is to diversify. We live in a world with no status quo. Any company/sector can get disrupted & lose a lot of value. Avoid holding more than 10-20% of any single stock or sector, the lesser, the better. It's still high but better than 50%," Kamath added.

"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 28 Jul 2022, 02:23 PM IST
Next Story
Recommended For You

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started
Switch to the Mint app for fast and personalized news - Get App