People say the stock market is a risky place and you often come across stories that so and so got bankrupt due to huge losses in the sharebazaar. The thing is that more often than not, we focus on a small black dot on a big white board. Although we are not saying that the stock market is a safe place to invest and you can make quick money without much risk, what we want to say is that keep yourself open to options.
That is exactly what Abhishek Kar, a trader-cum-investor said when we asked him about the risks involved in trading.
More about the man in focus, Abhishek got interested in trading at the age of 16 not because he wanted to make money, but because he found it very interesting. It was after 2 years that he jumped into the real time markets. Since the last one and a half years he has been managing a 3 million dollar fund which majorly accounts to the portfolios of his HNI clients from USA, UAE and Germany.
He is a passionate trader and believes in advocating trading to the entire nation. To add icing to the cake, he is the second most followed Quoran globally in stock market related content on it. So, let’s know more about this young man who defied societal norms and did something unique in his life:
Tell us a bit about how you got interested in this field and some of the stepping stones in your journey
It all began somewhere around my graduation. Like most youngsters, even I felt like I should do something different. When I was doing my B. Com. graduation (Honours) there was a small chapter on business management that was about Primary markets and Stock markets. I came to know that while stock market is helping people make money, it is also making people bankrupt. Around that time, I also came across Warren Buffett who had made millions of dollars just by making correct Investments.
This inspired me and through my broker I started an account with only 2000 rupees, my pocket money. As I was not very good at stock markets, I lost the money in 4-5 bad investment moves. I tried different strategies each time and they helped me understand why it didn’t work out.
So after that stint, I decided that it’s better to learn first. During that time, internet was not as easily accessible, so I started reading different books on that topic. I read more than 50 articles and around 7 to 8 books about trading. Then I opened my own trading account and today with my hedging strategies I manage about 3 million dollars worth of people’s investments.
Why should one start trading?
I would like to break this question into two parts.
Part one: Should everyone start trading?
The answer is no because trading is an art.
The major thing about trading is that since we don’t have a formal education in stock markets, we do not know if we are made for it or not.
Most of the people who are involved in making investments and trading require a lot more analytical skill than being just money minded. Trading is actually about understanding emotions and psychology. That’s my number one advice to all my clients. Trading is not about trading stocks but about trading sentiments, so when you are investing you need to invest in stocks but when you are trading you need to trade with the sentiments.
Now coming to the second part of the question of why should one start trading?
There is a misconception that trading will lead to quick money. However, it actually requires a lot of effort. You should be ready to spend 12 hours a day.
If you are interested in making a quick buck then you should give a try to gambling or invest in crypto currencies.
The thing is that when you make a new account you should be willing to lose the 10000 you invested because at the end of the day, you can make 100000 rupees from 10000 but you can also lose those 10000 rupees, so you need to decide whether you are willing to take that risk.
This is because a lot of economies and people see only the good part while they forget to realise the fact that they could also lose their money.
The second point is that people with ability to read charts can make huge strides in trading.
Trading is as addictive as any other sport. People get adrenaline rush when they are involved in trading.
People make more money but they can get hooked up to it. First point is the leverage and the second is if you are passionate then you should do it so. If you are still confused whether to take up trading or not, then I would suggest that initially you should try paper trading and find out if you’re cut out for the job.
For trading stock what all things should be kept in mind?
You should read financial newspapers daily like Economic Times and Moneycontrol. Even if you’re going to trade you should know the basics of investing. You should constantly upgrade your knowledge through blogs or financial news channels.
For motivation, you should read some inspirational trader story like the story of George Soros. He made the Bank of England broke in a single day and made a billion dollars out of it. Mainstream arts have popularized a misconception that you need to do a lot of drugs and alcohol to be a successful trader as seen in the Wolf of Wall Street but I am totally against that and it is not a necessity. I do not engage and neither approve of such a behaviour.
One important thing about trading is to try to make a network of traders and investors. There are a lot of forums these days where you can connect with them. Stop loss is an important tool that people should know. This is the maximum amount of loss that I can incur. Know how much amount you can afford to lose in every trade and make a decision that I am not ready to risk more. if I lose more than 1000 rupees I will close in on the trade. You need discipline to take advantage of leverage and if shares take a hit you need to get rid of them at the moment and not think that you will probably make money off it later.
What would you like to be called, an entrepreneur, a broker or an investor?
I prefer the word trader as it really gives me the kick.
Trader-cum-investor , since the surplus I make I invest, so that is what i prefer.
Trading has got a drawback like when I reach 45-50 maybe I won’t wish to stay glued to the monitor for 7-9 hours a day. So at that time I will just hope that out of the invested money, I get some money by just staying calm and reaping the rewards of my work.
What are your views on the PNB scam?
One thing that I would like to point out is that this is not the first time that such a thing has happened. Similar scenarios have happened before and this is the third time in the past few decades. This had happened first time in 1992 to Harshad Mehta, in 2000s to Ketan Parekh which was again a financial system loophole and now PNB and Rotomac loophole scam. During each time, a public sector bank has been involved so one has to be really careful about the corruption going on in the public sector banks..
One thing that I would like to highlight is that the PNB scam is probably the start. If you see every bubble it ends with the scam. The stock market in the last 4-5 years has run up like anything so if you realize that in 1992 in stock market, the bubble burst when Harshad Mehta case came up.
In 2000, the Ketan Parikh case and in 2002 the bubble like the dot.com bubble and now it is a Nirav Modi case.
The LOU cannot be issued for more than 90 days. Where were these people sitting at that time? Now they came to ask money from PNB. The scam started from 2011 and span for an LOU is 90 to 120 days and maximum it can be 6 months. So where were these people sitting and why didn’t they ask for the money in 201 People are blaming the SWIFT, even when an organisation as big as the second largest PSU in the country(PNB), was not integrated with the SWIFT. It is like you are giving someone the money and there is no record of it.
My advice would be don’t invest in PNB because it might soon come into 2 digit figures
Quick learning tip by Abhishek: Make money by investing when there is blood on the street and book gains when there is extreme euphoria in the markets. Best part about the market is that it gives chances to everyone. Trading is the only place where you can make money by selling stock. When you are investing you can only buy once. you make profit and then you can sell.
Do you think that the valuation of some startups have been inflated?
If you look into companies like Flipkart, 3 years back its valuation was around 30 billion dollars and now it has dropped down to 9 billion dollars and recently it gained some value to reach 10 billion after acquiring Myntra. They have calculated wrong values because they have been using a wrong metric and while calculating the valuations they use GMV value. They are very clever in evaluating their companies. They try to increase the value of the startup. If actual value is 10000 crore, then by using right metric we can make it 40000 gross. Right now people started realizing it, so if you say about the state of companies like Flipkart, all the valuations were inflated 5 years ago. Rakesh Jhunjhunwala (A renowned investor and trader), says that even investment in shares has become very inflated.
They have inflated values at Flipkart also and after 5 years, the company will be on the verge of getting either sold out or be involved in some sort of merger.
Why is bitcoin a bubble?
I’ll tell you 3-4 reasons why I believe that it is a bubble: –
I agree that blockchain technology is a wonderful thing but Crypto as of now is a pure gamble and unlike stock markets, you can’t predict with utmost assurance.
So what is your long term goal?
India doesn’t have a formal real hedge fund so far specifically catering to the needs of a lot of big entities, that’s number one
Minimum account is of 2 crore so the difference between hedge fund and mutual fund is the fact that with a mutual fund you can only invest in equity while with the Hedge Fund you are free to invest in bond market or even do some trading.
In the longer run, I plan on investing by forming a private equity firm not startups exactly but promising and growth oriented companies.
He also shares his views on his YouTube channel
We wish Abhishek all the best for his future endeavours. He conducts various seminars on trading and investing in stock markets and also he has agreed to share some of his original content with us about his views on the market and also about his thoughts on startups. So stay tuned!
Interview by Sumeet Patel