Zerodha's Nithin Kamath says frequent trading lowers odds of profitability for most investors - CNBC TV18

Nithin Kamath of Zerodha says frequent trading lowers profits for most retail investors. Zerodha avoids tactics to boost trading, with brokerage revenue at 20-25% of listed peers.Zerodha co-founder and CEO Nithin Kamath said most retail investors reduce their chances of making profits when they trade more frequently. In a post on X, he said the platform's brokerage revenue -- expressed as a percentage of client funds -- is about 20-25% of levels reported by listed peers, which he interpreted as clients trading around 75% less relative to their capital.

Kamath said that, with limited exceptions, increased trading activity tends to correlate with weaker outcomes.

"More activity doesn't mean better returns; it usually means a higher chance of blowing out your account," he wrote, adding that frequent trading rarely improves profitability for individual investors.

He argued that it is not always in a brokerage platform's long-term interest to encourage higher volumes, even though doing so may boost short-term revenue. According to him, the firm does not use push notifications promoting trades, landing pages showing "trending stocks" or "most traded F&O contracts," or design patterns aimed at driving activity. He said some features introduced over the years have instead reduced user activity.

Kamath added that employees are not incentivised on brokerage revenue, a policy he said has been in place since the company's inception. He acknowledged that resisting practices that could increase revenues "in the short term" is challenging but said the broader industry faces similar pressures.