How Zerodha’s Nithin Kamath Manages His Personal Finances

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In terms of investments, Kamath is not very active in managing his personal portfolio. It is his younger brother, Nikhil Kamath, who is also a co-founder of the stock trading platform, who takes care of it. Nikhil Kamath also founded True Beacon, an alternative asset manager in 2019. (Mint spoke to Nikhil in April 2022 about his portfolio and you can read about it.

Nithin Kamat claims that his portfolio’s asset allocation and performance would be similar to that of his brother. The Kamath brothers maintain a diversified portfolio with exposure to equities (40%), debt (40%) and gold (20%). They did not assign any valuation to their stake in Zerodha.

“If Zerodha were equity, then the numbers above in terms of asset allocation will most likely be skewed towards equity,” said Kamath, who also talked about the different asset classes and how he manages his personal finances. Edited excerpts from an interview:

What is your investment philosophy? How would you distribute 100 between asset classes today?

I would be as equity aggressive as possible, assuming my worst situations are covered by a sufficient cash balance in the bank.

I think India will become an economic superpower in the next 5-10 years with a lot of good things going in our favor such as population, demographics, GDP growth. Of course, there will be volatility throughout this journey, so I would be staggering my investments.

Will you follow an active or passive approach?

I would do active stock picking rather than the passive approach. My main skill is in this area.

What is your vision of real estate?

For any asset class, there should be a return of at least 4-5%. This yield is around 75% of fixed deposit yields (5.5-6.5%), considering that there would be upside potential in the valuation of the asset in question. But this is not the case with real estate in India.

Also, I think for the country to be successful, in the long run, we need to support entrepreneurs rather than letting money get stuck in real estate and gold.

How do you choose start-ups?

I am very passionate about our investments through Rainmatter, an initiative of Zerodha which funds and incubates innovative Indian fintech start-ups.

The only return on investment (ROI) on these investments that we seek is that we create impact. So all these investments in my head are like a CSR budget, thinking everything is going to explode. So, I don’t know if it really technically qualifies as investments.

How often do you check your personal portfolio?

Whenever we advance taxes, we (brothers) discuss our investments, but not on a granular level.

Do you trade?

I haven’t taken a single trade after 2010 (except to test the platform). But I still consider myself a good trader. I believe a lot of people think of trading as simply trading stocks.

For me, it’s really trading your time and effort where the risk of reward is in your favor. And I think I’m in the biggest exchange of my life with Zerodha, which is the maximum result for my time and effort.

I am however a pessimistic trader as I always try to factor in the worst possible outcome.

Do you have a credit card?

In the early 2000s, I took out a credit card to pay for my GMAT fees of around 20,000. It took me five years to pay it off. By the time the loan was closed, I think I paid four times the amount borrowed, including interest charges, late payment fees, etc. As soon as I started making enough money, the first thing I did was throw away that credit card. After that, I didn’t have a credit card for almost 10 years. I have one currently because it is useful when traveling abroad.

How did you pay for your first home?

We bought our first apartment in 2013-14 only after I had a clear idea of ​​my cash flow. The investment I made in the house was really only a small part of my financial situation at that time. I took out a small home loan for this, but it was more for tax planning than to finance the purchase of the house.

Do you have an emergency corpus?

We keep enough corpus – a risk-free allocation – that will ensure we have enough dry powder to get our lives back even if we were to blow it all up and have to start all over again.

Do you have life insurance or health insurance?

The only life insurance policies in my name are those purchased by my father when I was young. With the emergency corpus aside, I don’t really need to go get a temporary insurance policy now. In terms of health, I do not have an individual policy, but I am covered by the collective health coverage that we have at Zerodha.

(Note to readers: Through this series, we attempt to highlight the basics of personal finance such as asset allocation, diversification, and rebalancing. We are not suggesting replicating Kamath’s asset allocation, as personal finances are specific to each individual and differ from person to person.)

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