With the stock market experiencing a significant correction, Zerodha CEO Nithin Kamath has shared key insights for investors, particularly those who began investing post-pandemic and are now facing their first real downturn.
“For investors who started investing after the pandemic, this is the first real market correction. Markets are cyclical and given the way our markets went up from late 2020, this fall was inevitable,” Kamath wrote in a LinkedIn post.
According to Kamath, a major concern is the rising number of investors pausing their systematic investment plans (SIPs). Kamath warned that halting SIPs could hurt long-term growth, stressing the importance of averaging investments across market cycles. “You averaged on your way up from 2021; now, you get to average on the way down,” he explained. Notably, a recent report by JM Financial stated that the SIP stoppage ratio spiked to 109% in January, the highest since April 2023.
Drawing from past trends, Kamath reminded investors that in 2020, large, mid and small-cap stocks plummeted by 25-40% before rebounding with gains of 200-400%. He cautioned that panicking during downturns can lead to missing out on future recoveries.
He further stated that maintaining a disciplined, long-term investment strategy. “If you had panicked, you would have missed the rebound. As long as you invest regularly in the right funds, diversify, and stay disciplined, your chances of long-term success are high,” Kamath wrote.
Kamath also strongly discouraged borrowing money to invest. “There’s no shortage of businesses encouraging you to take loans for investing, but that’s a bad idea,” he said, noting that leverage increases emotional stress and forces panic-driven decisions.
Ending on a pragmatic note, Kamath urged investors to stay focused and said, “You’re better off investing regularly and doing something useful in life than getting carried away by the doom and gloom.”