Zerodha Founder Warns Against This Product To Invest For Retail Investors


Zerodha online brokerage founder Nithin Kamath called “buy now, pay later” (BNPL) the worst financial product for retail investors. In a series of tweets, Nithin Kamath explained why BNPL’s lending activity may not be the right investment method for clients.

“But given the high client acquisition costs for many brokers, what worries me is that if someone launches one type of product buy now pay later to invest, it will end up pushing everyone. world to start. Using this as a way to generate income will not work for customers, ”Nithin Kamath tweeted.

Kamath also explained that buying stocks with around 15% borrowing and the risk of being wound up in drawings, is “probably the worst financial product for retail investors.”

“Hoping that the brokerage industry like any other does not turn into a loan business to recover the very high cost of acquiring a client,” he added.

His remarks came on the day the stock markets have experienced a bloodbath since opening Monday.

At the closing bell, the BSE S&P Sensex lost 1170.12 points or 1.96% to 58,465.89, while the Nifty 50 lost 348.30 points or 1.96% to 17,416.50.

“Unlike previous bull races, there isn’t a lot of leverage in the system this time around. Most stocks are bought with all of the money up front. So when there are declines in the market on days like today, retail investors don’t have to liquidate, which also increases volatility, ”said the founder of Zerodha.

“Credit goes to SEBI and all of us, the new generation online brokers who haven’t pushed customers to borrow and buy while placing orders. If the platforms allowed greed to trick users into borrowing to buy more quantities, customers would ignore the risks of margin financing (MTF), “he added.

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