Why less trading might actually work better for you, Zerodha co-founder Nithin Kamath explains

Challenging a widely held assumption, Zerodha co-founder and CEO Nithin Kamath, asserted that the odds of being profitable actually decline as trading activity increases, a trend he believes is overlooked by most retail participants and even by many platforms.

Kamath stated that with few exceptions, frequent trading correlates with reduced odds of success in the market. According to him, more activity does not necessarily translate into better returns; rather, it usually increases the risk exposure for retail traders.

Taking to social media platform X, Kamath revealed that Zerodha’s brokerage revenue as a percentage of client funds stands at only 20–25% of that of listed brokerage peers. He attributed this to the fact that Zerodha’s clients trade nearly 75% less in terms of capital deployed.

“As a % of client funds, our brokerage revenue is 20-25% of our listed peers. That means our clients trade a lot less (75% less) as a proportion of their capital,” Kamath said in his post.

Link: https://x.com/Nithin0dha/status/1998279685549981991

Kamath described this lower activity as a conscious outcome of the company’s business model, which does not incentivise higher trading volumes.

Kamath argued that while pushing customers to trade more may offer a short-term boost in revenue, it ultimately harms them in the long run. He stated that it is in a platform’s best interest to ensure customers trade thoughtfully and less frequently, so they can remain invested for the long term and potentially benefit from more stable returns.He also elaborated on Zerodha’s long-standing approach of avoiding aggressive tactics commonly seen in other trading platforms.

From the beginning, Kamath noted, Zerodha has steered clear of features designed to nudge users into trading more. This includes avoiding push notifications that encourage trading, not featuring “trending stocks” or “most traded F&O contracts” on landing pages, and refraining from using dark patterns aimed at manufacturing activity.

Instead, he mentioned that some features were deliberately designed to reduce excessive trading.

Kamath further emphasised that no employee at Zerodha is incentivised based on brokerage revenue, a policy that has been in place since the company’s inception. This, he noted, aligns employee incentives with the goal of long-term customer retention and prudent trading behaviour.

However, Kamath also acknowledged the internal challenge of resisting the temptation to employ strategies that could increase short-term revenue. He admitted that avoiding shortcuts and not giving in to the fear of missing out (FOMO) on potential revenue gains can be difficult, even when such restraint is in the customer’s best interest.

Also read: KRBL, LT Foods, other rice stocks crack up to 10% as Trump hints at possible tariffs on Indian imports

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.