Samir Arora, Founder & Fund Manager, Helios Capital recently stirred a hornet’s nest by quoting a Zerodha finding that said less than 1% active F&O traders earn over 7% annually.
“‘Less than 1 pct of those who actively trade futures and options have earned more than 7pct annually.’ Go back to your full time jobs. Don’t listen to people offering you financial freedom. Invest your savings in the mkt- don’t try and make a living off the mkt,” tweeted Arora while offering a word of caution on how fickle F&O trading can get.
With his tongue firmly inside his cheek, Arora said chaat and paan sellers have better chances of turning into millionaires than F&O traders.
He quoted a July 2021 Times of India report that said “more than 250 chaat and paan sellers in Kanpur found to be millionaires”.
Arora’s tweet caught like wildfire among traders on the microblogging platform. One trader said, “I’m sure less than 1% of fund managers are able to beat the market consistently! So what’s the point? To each his own!” Arora replied, “Point is that you should understand the odds of success. if you can’t understand that, you anyway cannot do well in trading.”
The top fund manager replied to another Twitter user saying, “Market needs participation of retail to take away their money, as the data shows. It is for trader to decide how much he wants to help the market.”
According to Nithin Kamath, the CEO of Zerodha, just 1% of his firm’s customers who actively trade equity derivatives generated annual returns higher than bank deposits over the past three years.
“We have used every opportunity to create awareness that in the long run (3-year period), less than 1% of those who actively trade equity futures and options generate returns higher than bank fixed deposits or 7% annually,” Kamath said in a business update on Zerodha, the country’s largest stockbroker, over the weekend.
“Generating profits from active trading is as hard as generating profits while running a business, if not harder, given that anyone can start trading and not everyone can start a business. The odds of succeeding when actively trading are very low, similar to any other walk of life, which requires skill, hard work, and some luck to succeed. From running a business to playing sports or music for a living,” he added.