Veteran Trader Reveals Core Market Misconception Costing Investors Billions
BENGALURU – Acknowledged market veteran and Zerodha co-founder Nithin Kamath recently underscored a basic flaw in the thinking of most traders: the illusion of predictive ability.Despite widespread awareness that market forecasting is unreliable, traders consistently act as if they can accurately anticipate future movements, leading to potentially devastating financial consequences.
Kamath, reflecting on his four and a half decades observing markets, admitted to initially falling prey to the same misconception. “It took me a really long time to realise that I really don’t know what’s going to happen next,” he stated.He initially believed his extensive experience – watching more market “ticks” in the S&P 500 than almost anyone over 40 years – would provide a unique edge. However, he ultimately concluded that “it doesn’t” confer any advantage in predicting market direction.
This realization, he explained, was a crucial turning point. While acknowledging the development of an “intuitive sense” over years of observation, Kamath emphasized that this intuition doesn’t translate to certainty. “I have a little bit of comfort knowing that I’ve kind of seen everything once or twice,” he conceded, but stressed that even that extensive experience doesn’t guarantee accurate predictions. The core issue, he suggests, lies in the inherent human tendency to believe in one’s own insights, even in the face of overwhelming evidence to the contrary. This disconnect between knowing markets are unpredictable and acting as if they aren’t remains, according to Kamath, the most common – and costly – mistake traders make.
